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Life is mysterious and death is certain. You cannot escape death and thus, we plan ways to make most of this life we have been given and try to prep-up our loved ones for a future that won’t trouble their lifestyle. While the emotional void cannot be filled, you can always insure the future and confirm financial support for your loved ones. Yes, this write-up has brought you an important guide on life insurance. Read on to load it.
Life insurance policy is a type of contract which is decided between an insured person and the insurance company. In this insurance policy, the nominee of the insured person has to be granted a sum of money after the insured’s demise. Life insurance cushions the family of a deceased person with financial stability.
People, to a bigger extent, are drawn to certain hesitation when it comes to buying life insurance and it is majorly because of lack of understanding of its significance. Being in an oblivion about the relaxing benefits of a life insurance cover deprives a larger number of people. Here, we have listed the reasons why life insurance is important.
You should have a life insurance because:
Protects your family
It is for the good for your family. Life insurance gives a financial caress to your spouse and your children after you. It meets the financial necessities of your loved ones, if in any case, you die prematurely.
Covers your liabilities
Since death is unpredictable, one leaves so many questions behind. One important reason why life insurance is important is that it ensures the payment of your debts, bills and any other financial liabilities.
Has got your back for long-term plans
Long-term plans such as buying our dream house, getting your children married, retirement plans etc. are looked after when you have a life insurance policy. This makes sure that your loved ones won’t have to suffer the unfulfillment of your dreams with them and you will be able to make them come true even after you're gone.
It frees you from worries
And it gives you a peace of mind and gentle sleep. Death is unavoidable and it is the cruelest truth out there. But knowing this when you opt for a life insurance cover, you ensure a future of your loved ones that is financially secured and peace of mind for yourself.
Yes, it is harsh and it stings hard but in the end, this decision makes a noteworthy difference.
Life insurance does not come without a bundle of treats. Life demands certain fulfillments to be lived and life insurance makes sure that your loved ones’ financial life doesn’t collapse due to an unfortunate, unwanted event.
Here are the benefits of life insurance:
Life Cover
Life insurance policy offers peace with life risk cover. In case of an untoward event, it will make sure your loved ones are protected from any financial burden.
Death Benefits
In life insurance policy, the insurer pays a sum of money to the insured person’s nominee upon their death. This amount includes the sum assured and bonus to the nominee. Therefore, it promises a financially beneficial life of your loved ones.
Apart from that, life insurance policy also looks after the needs of people who struggle with the source of income after a certain age, those who are retired or have met an accident. Such benefits are offered in different types of life insurance coverage which you can check upon based on how you wish to suit yourself.
Tax Benefits
One of the most important benefits of life insurance policy is that it comes with tax benefits. If you are a salaried employee who has purchased a life insurance policy. Know that you can claim tax deduction under Section 80C.
Income Benefits
When you purchase a life insurance policy, you ensure a source of income for your family. Life insurance provides income to the family on regular intervals which they can use to cover the day-to-day expenses.
Riders
Riders are additional benefits that you can purchase as add-ons on your insurance policy. They enhance the coverage of your policy which can be personal accident cover, critical illness cover, premium benefits etc.
Once you have understood the importance of life insurance policy, the next important consideration you need to make is the type of life insurance. Choosing a right type of life insurance policy for yourself can be overwhelming but it is not that challenging as it may feel at times.
In terms of essentials, there are two important and most common types of life insurance policies: term life insurance and whole life insurance. Term life insurance policy, as it name suggests, is based on a specific time period of policy. Whole life insurance, on the other side, is an insurance for a lifetime.
Apart from these two types of life insurance policies, there are many others that you may find compatible with your needs and not to mention, budget. Let’s know them all.
Here are the types of life insurance:
Term Life Insurance Policy
Term life insurance policy is one of the most affordable types of life insurance that offers compensation during a specified period. This type of life insurance, as its name suggests, is only beneficial in case of a death which took place during a specified term. If the insured person is alive when the term ends, this life insurance policy ceases the payout and one cannot claim it.
Whole Life Insurance Policy
Whole life insurance policy is a type of life insurance that does not expire and provides coverage throughout lifetime. This life insurance policy offers cash value along with death benefits. This cash value increases over time and it can be withdrawn or used for loan.
Money Back Policy
Money back policy is another type of life insurance that provides benefits during your policy tenure. This type of life insurance gives a portion of the sum assured to you during the policy tenure and the rest amount along with bonus is paid at maturity. However, the entire sum is paid to the nominee if the policyholder dies during the policy tenure.
Endowment Policy
The endowment plans in life insurance give a financial hand to you in terms of saving as well as risk cover. This type of life insurance offers life cover in case of a policyholder's death. The insurance company also pays out the maturity benefit to the policyholder if he/she survives the policy term.
Unit Linked Insurance Plans
Unit Linked Insurance Plan is a duo of insurance and investment where a portion of premium is invested in funds and the remaining is kept as risk cover. In this type of life insurance policy, the policyholder can choose if they want to invest a sum in debt/equity. Apart from that, a policyholder can also decide the proportion in which they want to divide the premium between these two.
A certain amount paid can appear in manifolds of savings in the time uncontrollable and unfortunate circumstances. Speaking of which, a number of people keep wondering who decides the life insurance premium rates.
It is quite a tiresome to dig into that but again, watching premium rates differ is not any less frustrating. Know that premium rates are determined by different factors which include age, gender and medical conditions.
Here are the important factors affecting the life insurance premium rates:
Age
This one is the major and obvious factor that affects the life insurance premium rates. Those who are young in age have quite a less probability of catching any disease or passing away in comparison with someone older. Thus, people who are in their youth have to pay a lower insurance premium rate than those who are older.
Lifestyle Habits
Being an adventure-lover can make people pay a higher premium. If a person is into risk-taking activities, the premium rate for their life insurance will be affected by that significantly.
Consumption of Alcohol and tobacco
Here comes one of the big-fat factors that can predict the intensity of your premium rate just like that. Consuming alcohol and smoking can drive your health to a not-good condition and thus, it is a clear excuse for insurance companies to tweak the premium rates at a noticeably high extent. Know, it is one of the essential factors that insurers ensure before taking it further.
Medical History
Another important factor affecting life insurance premium is your medical history. Insurance companies ask for health records in order to make sure you are not trapped in any potential health condition. Health records can invite differences in premium rate.
Policy
Life insurance policy itself is one of the major factors that affect insurance premium rates. If you are paying for a longer tenure then you will be able to enjoy a larger amount of coverage. Note that short periods of tenure are comparatively expensive than the longer ones.
Profession
Yes, your profession can budge the premium. Another important factor affecting the premium rate. If you are working in any profession that involves risk such as mining, fisheries, oil and gas etc. then you will have to pay a higher premium.
Gender
It is not about gender inequality but an average span of life of women that is longer than the length of life men have. Women live longer than men, 5 years on average. Thus, they have to pay a lower rate of life insurance premium than men.
Every insurance premium is dependent on different individuals. Apart from that, the combination of factors mentioned above can also influence the premium to an important extent. On the top, rates of premium for life insurance vary across different insurance companies and their rules of rating also determine the life insurance premium.
Here is a list of all the documents that are required for buying life insurance policy:
Age proof: PAN card, driving licence, passport, voter's id, school/ college certificate, birth certificate.
Address proof: Passport, telephone bill, utility bills, electricity bill, voter's id, bank a/c statement, ration card, letter from recognized public authority.
Photo identity proof: Driving license, ration card, voter's id card, passport, letter from recognised public authority or public servant with photograph verifying the identity and residence, aadhar card.
Medical reports
Latest passport size photograph.
It is time to know how to file a life insurance claim. Here, you will learn two types of claims that can be made on life insurance policy:
Maturity claim and,
Death claim
In order to avoid any complication or rejection on claim, you should be aware of all the checkpoints that are required to be followed for the claim process. Let’s understand how it works.
Below are mentioned the steps to file a death claim:
First things first, you need to inform your insurer about the death of the policyholder. There are two categories in which a death is classified based on when this policy was bought from the insurance company- early death and non-early death.
You need to get the claim intimation form from the insurance company.
Now is the time for documentation. You should ask the insurer about all the documents that are required to be submitted.
Usually, these documents are required at the time of death claim:
Original policy documents
Death Certificate
Age proof of the insured
ID proof of the beneficiary
Proof of cause of death- medical certificate
Police FIR: this document is required in case of an unnatural death
Postmortem report: in case of an unnatural death
Hospital records and certificates
Cremation certificate
Employer certificate
So, that is all you need to do in order to claim life insurance policy. Make sure you don’t take a long time to inform the insurance company about the event and have all the documents required by them in order to avoid hassle.
In maturity claim, the insurance company intimates the insured when the policy is maturing. They usually inform the insured two or three months before the date of maturity.
The following documents are required for maturity claim:
Original policy document
Policy discharge form
ID proof of the insured
Age proof of the insured
Proof of bank account details (a cancelled check or a passbook copy)
Here are some basic terms related to life insurance that you must know:
Premium: A premium is an amount that is paid to buy insurance policy in exchange for coverage.
Insured/Life assured: An insured or life assured is an individual in whose name the policy has been bought is referred to as insured.
Insurer: The insurance policy that offers insurance policy is referred to as insurer.
Sum assured: Sum assured is an amount of money an insurer pays you as coverage.
Nominee: A nominee is a person who is nominated by the insured to be given the coverage in case of an unfortunate event.
Rider: Rider is a feature or benefit that can be bought in addition to the primary insurance policy.
Policy Tenure: Policy tenure is the time period for which the policy gives the coverage.
Maturity age: Maturity age is a time at which the policy tenure ends.
Death benefit: Death benefit is a coverage provided by the insurer to the nominee in case of death or life assured.
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Final Words: Life Insurance
A loved one’s death leaves a void, an ache that no consolation in this world can ease. Life insurance cannot suit the emotional whereabouts but it sure holds your hand and promises to give a financial cushion to your family.
FAQs
Yes. You can definitely have multiple life insurance policies. There is no law that restricts you from having a combination of life insurance policies. Usually it happens in a case where a policyholder gets insurance through their employer in addition to their existing policy.
If you are asking whether a life insurance policy is worth it or not then here is the answer for you: Yes, life insurance policy is worth it. It prevents your family or loved ones from financial disturbance and helps them manage all the expenses well.
You can get a life insurance policy on someone only when they give their consent to do that. Besides, the policy must be signed by them and you should prove that you are financially dependent on that person.
Know More About
You're eligible for a Life Insurance if you:
Are legally adult enough to handle it
Have still got it
Get a regular pay check
Make more than a basic buck
Your eligibility depends on:
Earn more than minimum income required
Maximum allowed Life Insurance is Rs. 10K to Rs. 45 lakhs
EMIs of other loans loweryour eligibility
Boost your eligibility by:
Pay off your credit card bills
Choose longer tenure loan up to 5 years
Nothing gets done without that paperwork (which we'll happily carry over to the bank for you, no sweat). Here's what you'll need:
- 1. Photo ID and age proof
- 2. Signed application form with photograph
- 3. Residence proof
- 4. Last 6 months bank statement
- 5. Documentation for salaried applicants:
- Last 3 months salary - slips
- Form 16 or Income Tax Returns
- 6. Documentation for self-employed applicants:
- Last 3 years Income Tax Returns with computation of Income
- Last 3 years CA Certified / Audited Balance Sheet and Profit & Loss Account