About Life Insurance Policy
The contract between an insurance provider and an individual is referred to as a life insurance policy. According to the agreement, policyholders pay a particular amount as a policy premium, and the insurer pays a specific amount to the policyholder’s family in the event of the life insured’s unexpected demise Because death is the one certainty in life, purchasing the finest life insurance policy that meets your financial demands is important..
Who is eligible to purchase a life insurance policy?
Any person, male or female, between the ages of 18 and 65, can purchase life insurance in India, according to the terms and circumstances of the policy.
You should also be aware of the following relevant issues of purchasing life insurance:
- Smokers, like nonsmokers, can purchase life insurance, however the premiums may change. They must also disclose their smoking habits to the insurer when purchasing a life insurance policy.
- Disabled people might also get the finest life insurance policy provided they can show that they take care of their family. They must also submit to medical examinations in order to assess the policy premium based on the level of risk involved.
- Life insurance can be purchased by those with pre-existing medical issues. If they have any pre-existing health conditions, they must inform the insurance carrier. Failure to provide this information while acquiring a policy may result in a claim being denied later.
Individuals with pre-existing conditions can get life insurance with JAE Services.
Important Life Insurance Policy Terminology
- About Policy
The policy is the insurance contract between you and the insurance company as evidenced by this document, the Proposal Form, the Schedule, and any additional information/document(s) provided to the insurance company in respect of the Proposal Form, as well as any written instructions from you subject to the insurance company’s acceptance of the same, and any endorsement issued by the insurance company.
- About Sum Assured
It is the sum payable to a nominee in the event of the insured’s untimely death, as stipulated in the selected life insurance policy. You may estimate the premium payable for a certain sum assured using an online life insurance premium calculator.
- About Annualised Premium
Annualised Premium is the amount indicated in the Policy Schedule that denotes the Premium payable for a Policy Year chosen by you (as policyholder), excluding any additional premium paid for Underwriting, loadings for modal premium, Rider Premiums, and applicable taxes, cess, or levies, if any;
- Life Insurance Coverage Period
It refers to the length of time that the insured is covered under a life insurance policy. It may differ from the premium payment term/period that you must pay for a life insurance policy.
- Maturity Date for the life Insurance Policy
It refers to the date on which the Policy Term expires as provided in the Schedule;
- Premium of Life Insurance
It referred to an amount indicated in the Policy Schedule that You must pay by the due dates in order to secure the benefits under the Policy, excluding any applicable taxes, cess, or levies.
- Premium Payment Mode
The premium for life insurance can be paid in the following ways:
- Throughout the policy’s existence, regular mode (monthly, quarterly, half-yearly, or annually) is used.
- A defined premium payment period, which could be a certain number of years (not till the end of the policy term)
- Life Insurance Riders
Riders are features that are offered in addition to the Policy’s core advantages. The accidental death benefit rider, critical illness rider, and premium waiver rider are among them.
Types of Life Insurance Plans
Before purchasing any sort of life insurance coverage, the consumer must first understand the many varieties available.
- Term Insurance
It is a low-cost type of life insurance that provides a large sum assured for low premiums. In the event of your untimely death, the insurance company will pay a sum assured to the policy nominee.
- Unit Linked Insurance Plans (ULIPs)
ULIPs are a special sort of life insurance that provides both life insurance and market-linked profits on your investment. A portion of the premium is invested in various fund alternatives, while the remainder is used to provide life insurance.
- Child Plans
A child plan is a type of ULIP that allows you to build wealth to support your child’s higher education goals. This plan also gives you the freedom to invest in a variety of funds according on your financial situation and long-term aspirations.
- Endowment Plans
A combination of life insurance and savings is what these plans are referred to as. You will receive life insurance as well as a savings advantage if you invest in an endowment plan. When you outlive the duration of your plan, you will get a maturity benefit as well as monthly incentives (if any).
- Retirement Plans
These plans, also known as deferred pension schemes, are designed to assist you in building money for your retirement years so that you can experience financial freedom. If you pass away during the policy’s term, your nominee will be paid immediately. If you survive the term, you will receive the vesting benefit.
Ways to Select the Best Life Insurance Policy
With so many different life insurance plans on the market, it’s crucial to pick the proper one. A wide range of financial needs must be considered when choosing a life insurance plan.
Here are some points to consider about when looking for the greatest life insurance policy:
- Understand The Types of Life Insurance
People who do not understand how life insurance works are unable to make informed decisions about which coverage to purchase. As a result, it’s critical to have a good understanding of the many types of life insurance plans before settling on one.
- Understand Your Financial Needs
A life insurance policy that is appropriate for your colleagues might not be appropriate for you. Before you begin evaluating different plans, you must first examine your unique needs, such as pricing, choice of sum assured, and riders.
- Compare Plans as per Benefits
Because there are so many different life insurance plans to choose from, you need to be sure you choose the correct one with the right features. To do so, you’ll need to conduct your study and compare the plans based on numerous factors such as premium, sum assured, and investment component, if applicable.
How Do You Pick the Right Life Insurance Company for Your Family?
The correct life insurance company must be chosen in order for you or your loved ones to receive the benefits desired from the buy plan.
When looking for the best life insurance provider, keep the following factors in mind:
- Claim Settlement Ratio (CSR)
This ratio compares the number of claims resolved by an insurer to the number of claims received in a given fiscal year. The greater your CSR, the more likely your life insurance claim will be paid.
- Solvency Ratio
It refers to an insurance company’s ability to manage sufficient cash flow to pay down its debts. If this ratio shows an insurer’s strength to satisfy the connected liabilities, it can enable hassle-free claim settlement.
Every life insurance policy has a different cost. As a result, you must select the one that appears to be the most cost-effective for you. To avoid losing your life insurance, be sure you don’t choose a plan with an excessively high premium that you can’t afford.
- Persistency Ratio
It expresses the proportion of policyholders who pay the premium compared to the total number of active policyholders. It’s a solid indicator of how satisfied the insurer’s customers are.
- Claim Settlement
Your family will not have to go through any hassles in order to collect life insurance payments thanks to a simplified claim settlement method. It’s best to go with an insurance company that handles claims in a streamlined manner.
How Can a Life Insurance Plan Help You Save Money on Taxes?
Life insurance policies are seen to be effective tax planning instruments. The reason for this is that the policyholder is entitled to tax benefits under the Income Tax Act of 1961. The premiums paid for various life insurance schemes are tax deductible under Section 80C, while the payment or maturity benefit is tax-free under Section 10(10D).
What Are Your Options for Paying for a Life Insurance Policy?
You have the option of paying the premium for life insurance products all at once or in instalments over time. Most life insurance policies provide you the option of making a single (one-time) payment, a regular (continuous) payment, or a limited premium payment duration (for a payment tenure less than the policy coverage period).
You can choose from the following payment alternatives when using normal premium payment mode:
How Will Your Family Receive the Claim Money of Life Insurance?
Your loved ones will get the policy benefits after your (Life insured) untimely death by filing a claim with your insurer.
To claim life insurance benefits, follow these steps:
- Notify the insurance as soon as possible.
- Request a copy of the claim notification form.
- Request a copy of the papers that must be presented with the claim form.
- If the coverage was purchased online, submit a claim request online as well.
To ensure a speedy and uncomplicated claim settlement, the nominee of a policy should not wait too long after the insured’s death.
What Kind of Life Insurance Coverage Do You Need?
After deciding to purchase life insurance, the next important step is to select a specific life cover, or sum assured. Here are some things to consider when estimating the cost of a life insurance policy:
- Think about your working years.
A life insurance policy can be used to replace lost income. As a result, when deciding on the sum assured, take into account the number of active working years it would replace. For example, if you are 25 years old now and aim to retire at the age of 50, you will have 25 years of earning potential to consider.
- Make a list of your regular expenses.
On a year-to-year basis, the sum assured should cover recurring financial outgoings such as household expenses, bills, and existing loan EMIs. You will have a better understanding of the amount to be decided if you map out these expenses for a specified period.
- Consider Important Life Stages in Your Family’s History
Certain life phases or circumstances necessitate substantial lump sum payments. Weddings, retirement, and a child’s further education are just a few examples. To guarantee that your family is not financially burdened after you, the sum assured should cover them all.