Everything about Life Insurance Explained

What is Life Insurance?

Benefits of Life Insurance

Types of Life Insurance

How much Life Insurance do You need?

To keep calculations simple, we usually apply the basic thumb rule as follows to calculate HLV:

 

Age Approx HLV
18-35 25 X Annual Income
36-45 20 X Annual Income
46-50 15 X Annual Income
51-60 10 X Annual Income

For example, for a 30-year-old person earning 10 lac annually, the ideal life cover would be 25 x 10,00,000= 2,50,00,000.

Who Should Buy Life Insurance?

How Does Life Insurance work?

Factors Affecting Life Insurance Premium

What is a Life Insurance Rider?

Types of Life Insurance Claims

FAQs about Life Insurance Policy in India

What is the consequence of not paying my insurance premium on time?

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A grace period of 30 days is usually given over and above the premium due date. If the premium remains unpaid even after this period, the policy lapses. You need to pay the revival premium if you want to restart the policy.  

What do I receive on the maturity of my Life Insurance Policy?

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If your Life Insurance Policy has a savings component, i.e., other than a term plan, you receive the maturity benefit (as Lump Sum or Regular payouts, whatever option is chosen). This amount is the total of all your premiums paid during the policy term plus a bonus (if any). 

What does "Fully Paid Up" mean on a Permanent Life Insurance Policy?

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Fully Paid Up means you have paid enough premium payments to cover the cost of Insurance for the rest of your life.  

Do I need to pay tax on my maturity benefit?

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No, a life insurance's maturity benefit comes under Section 10(10D) of the Income Tax Act and is tax-free. 

What are the different options available for me to pay the premium?

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Here are the most common methods that you can choose to pay your premium on time: 

  • Collection Agents: The oldest method wherein you can pay your premium in cash or cheque to the authorised agent and collect a receipt. 
  • Visit the Insurance Company Office: Just visit them and pay your premium in cash/cheque on the spot. 
  • Official Website: Most insurance companies provide an online payment option on their portal. 
  • ECS: One of the best methods wherein the standing instructions on your account for auto-debit never let you default on your premium payment. 
  • PDCs: You can submit Post Dated Cheques to your insurer that they will present on the due dates. 
  • IVR and ATMs: Many insurers are making things simpler by providing a premium payment option on IVR and ATMs. 
  • Franchise/Premium Payment Points: A few insurers provide premium payment points that are, in a way, their franchisee's presence to accept the premiums. 

What if I do not want my Life Insurance Policy once I have taken it?

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Term Plans generally come with a Free-Look period of 15 days, during which you can check the complete details, accept certain terms or cancel the policy altogether. 

On maturity, can a new policy be availed at the rate of the old premium?

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No. Once the policy matures, it is closed and cannot be renewed. In such a case, if the policyholder wishes, they have to take a new policy as per the new terms and conditions.

Am I still eligible for Life Insurance Coverage if I have a serious health concern?

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Usually, all insurance providers require the applicant to undergo medical testing, after which they decide the coverage and premium depending on the risk area you fall into. Even if you are not in the best of health or suffering from any serious ailment, you still have a few options available for Insurance, though at an elevated premium.  

Can I buy Life Insurance for anyone I wish to?

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You can buy Life Insurance for someone other than you, but the main factor here is "Insurable Interest" along with the insured's consent.

Insurable Interest means a person's interest in something like property or another individual wherein any loss or harm to this property or individual would affect the person. 

An insurable interest relationship is usually between:

  • Spouses and Children
  • Business Owner and Key Employees
  • A creditor and a Borrower

Why should I buy another Life Insurance Policy when I already have one policy from my employer?

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It's great if you have Life Coverage from your employer. However, in most cases, these covers are not enough. Analyse your financial cover requirements and decide if you need another Insurance cover. In such cases, Term Plans, due to their affordability, can be a good choice as an addition. Also, the insurance plans provided by the employer cease to exist once you leave your company.

What is Mortgage Insurance?

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A Mortgage Insurance Policy is designed specifically to repay the mortgage debts in the unforeseen event of the policyholder's death. The beneficiary in the case of Mortgage Insurance is the lender and not any immediate family member. It basically lowers the risk to the lender of providing a loan to a borrower. 

If I stop smoking today, or maybe 6 months before taking a Life Insurance Policy, will I get a Non-Smoker rate?

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The premium difference is considerable between a smoker and a non-smoker, and Smokers usually pay at least two to four times more than non-smokers. Insurance companies provide a Non Smoker premium rate if you abstain from tobacco for at least 3-5 years; some even give it in 1-year abstinence from tobacco. However, since the underwriting rules differ across companies, it is best to check with your insurance provider.

What is the best kind of Life Insurance Policy?

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The best kind of Life Insurance is the one that suits your requirements. If you want high coverage at a low cost, go for Term Insurance. However, Whole Life Insurance should be the choice if you want coverage for the rest of your life. 

What is the Contestability Period in Insurance?

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The contestability Period in Life Insurance is the time frame during which an insurer can contest or question the claim raised by the beneficiaries. This is usually 2 years from the date of policy purchase. 

Disclaimer

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