Buy Life Insurance Policy Online in India

‘Life’ is undoubtedly the most beautiful gift of nature and can never be defined in monetary terms.

Can you ever put a price tag on it?

A family member’s demise certainly causes emotional turmoil, but if the member happens to be the primary breadwinner, it’s a huge financial shock for the family. Life Insurance ensures such unforeseen circumstances do not hit the financial security and future of the family.

Hence, it is of utmost importance that a person realises the value of their life for their dependents and accordingly purchases a Life Insurance Plan.

In simple terms, life insurance protects against financial loss from an earning member’s untimely death. In legal terms, it is a contract between a policy owner and an insurance provider wherein the latter promises to pay a certain amount of money to the beneficiary in case of loss of life of the insured.

Thus, Insurance cover is in return for a certain amount of money, called a ‘Premium”, that the insured pays to the insurance provider.

1. Financial Coverage and Risk Mitigation

Insurance payouts help the family take care of educational expenses, marriage expenses, loan payoffs and other regular expenses.  

2. Tax Benefits

The premiums paid towards the Life Insurance policy are exempt from tax under Section 80(c) of the Income Tax Act. Death or Maturity Benefits, i.e., any proceeds from Life Insurance, are also entirely tax-exempt under Section 10(10)(D) of the Income Tax Act.

3. Act As Collateral for Loan

Some insurance policies provide the option of taking loans against them. Hence, if, under any circumstances, you require a loan, you can use the Life Insurance Policy as collateral for the same.   

4. Additional Coverages through Riders

Some insurance plans also offer the option of riders that provide an additional benefit over and above the standard coverage of the Life Insurance Plan. For example, Critical Illness Rider covers the treatment of some specific critical diseases.

There is also a rider for Accidental Death Benefit that provides an additional Sum Assured in case of accidental death.

1. Term Life Insurance

Term Life Insurance is the basic and pure insurance plan with no investment component, and it provides a high amount of coverage in return for a considerably low premium.

Since they have no savings component attached to them, their premiums are significantly less for a certain sum assured when compared to any other kind of insurance plan. They are further affordable if bought at a young age since the premium is directly proportional to age.  

Term Plans also provide Multiple Death Benefit Pay-out options for the policyholder to manage their liabilities in an optimised manner in case of any eventuality. Staggered Payout, Fixed Monthly Pay-Out, and lump sum Pay-out are some payout options.

2. Whole Life Insurance

Whole Life Insurance Plans are a type of Insurance that provides coverage for the entire life of the insured. Hence, they are also known as Permanent Life Insurance.

In usual cases, the tenure of an insurance policy ranges between 10-30 years; however, in Whole Life Plans, the tenure is relatively longer and extends up to 100 years of age, thus ensuring financial protection for the family for a longer term. In addition to the death benefit, Whole Life Insurance also has a savings component called “cash value,” wherein the policyholder receives periodic bonuses.

The Whole Life Plan is an excellent option for individuals looking for wealth creation for retirement and who want to be financially covered for the future. Even in the later stages of life, people with liabilities must consider buying a whole life plan.  

3. Endowment Life Insurance

One of the most popular and appropriate insurance plans is the Endowment Plan. They provide the benefit of financial coverage and the much-needed wealth creation for long-term goals in life.  It helps an individual save regularly over time and create a corpus that can be availed as a Maturity Benefit at the end of the policy term.

However, if there is an unfortunate demise of the policyholder during this tenure, the Sum Assured, along with accumulated bonuses, if any, is paid to the nominee.

As a risk-averse individual looking forward to goal-based savings in a disciplined manner and having a life cover for uncertain circumstances, Endowment Plans are a perfect choice.  

4. Money Back Insurance Policy

Money Back Insurance Policy can easily be termed as an Endowment Plan with the benefit of liquidity.

In Money Back plans, the Sum Assured is paid regularly during the policy tenure. The amount of these payouts is a pre-decided percentage of the Sum Assured, and they start a few years after the policy starts. These payouts are known as survival benefits.  

In case of the policyholder's unfortunate demise during the policy's term, the whole maturity amount is paid to the nominee, irrespective of the number of payouts already paid. 

5. ULIP Insurance Plan

Unit Linked Insurance Plan or ULIP is a combination of Insurance and Investment. It’s a kind of Insurance where part of the premium is utilised in providing life cover, and the other portion is invested in financial instruments, i.e., equity and debt.

ULIP is the only investment where you can avail of market-related returns on your investment and have life coverage to protect your loved ones against life’s eventualities.

ULIP insurance is a perfect product if you are looking for wealth creation but at the same time also need to secure your family against unforeseen circumstances.

6. Child Insurance Plan

Considering the inflation in the cost of education viz-a-viz the average wage increase, it seems almost impossible for an ordinary person to afford a proper higher education depending on the regular income. Hence, it requires financial planning from a very early stage.

One striking feature of any Child Insurance Plan is the Waiver of Premium Benefit. Under this, in the unfortunate event of the death of the policyholder parent during the term of the policy, the Sum Assured is paid to the beneficiary, and the insurance provider undertakes to pay all the remaining premiums of the policy to complete the tenure successfully. On the policy's maturity, the beneficiary child receives the maturity amount.  

Many Child Insurance Plans provide the option of partial withdrawals once the child attains the age of 18 years. This is helpful to meet the immediate expenses during higher studies or any other requirements that need to be met before the complete maturity of the policy.  

Thus, Child Insurance Plans are customised to take care of a child's education, even in unforeseen circumstances.  

In the case of the unfortunate demise of the family's breadwinner, the insurance proceeds must be sufficient to take care of the complete financial liabilities of the family. Even in the absence of the policyholder, the family's lifestyle must stay safe. 

Children's education, marriage, pending liabilities, spouse needs, and regular expenses are some significant factors to consider while deciding the coverage requirement. This is the basic premise behind determining how much insurance a person needs.

Here are a few methods that consider these factors and help you determine an indicative figure for your Life Insurance coverage requirement: 

1. Expense Replacement

A method commonly suggested by most financial planners, the Expense Replacement method, takes into account all the expenses of an individual, like day-to-day expenses, future expenses like children’s education, marriage, financial requirements of dependents like spouse, parents, siblings, etc., loans and debts.

After arriving at this expenditure figure, we deduct our savings' present value, like investments and other life covers. Here, we do not consider assets like homes and cars in the calculation since we want our family to use them as utility and not depend on their monetary value.

This final figure gives us an idea of the insurance coverage amount required by a person.

2. Income Replacement

This method is based on the premise that the insurance proceeds must be sufficient enough to replace the lost earnings of the deceased breadwinner of the family. So, by this method, 

Insurance Cover = Current Annual Income x Number of Years left for retirement 

It's a simple method that gives you a close idea of the required Sum Assured, but a major drawback is that it does not factor in the inflation, income rise, and the major expenses on the way.

3. Human Life Value

To find how much Insurance someone needs, the major factor widely used across the insurance industry is the Human Life Value or HLV. HLV, in simple terms, is the monetary value attached to a person.

It is the present value of all future income a person would expect to earn for their family. It directly indicates the financial loss a family would suffer in case of the untimely death of the breadwinner of the family.

4. Underwriter’s Rule

While this formula has become widely prevalent due to easy calculation, it is believed to give a minimum figure as an indicator for the required Sum assured. 

The most significant benefit of Life Insurance is the financial stability it provides to the dependents in case of the policyholder's unfortunate demise. Hence, any individual who has financial dependents: spouse, parents, retirees with liabilities, or business people with financial liabilities, must definitely invest in a Life Insurance Plan.

1. Young Professionals: the younger you are, the lesser your premium

Young, freshly employed individuals usually think they don't need life insurance since they don't have any dependents. However, this thought might need to be corrected. At a young age, with a healthy body and no liabilities, your premium would be much lesser than it becomes in the later stages of life. And it remains the same for the complete term.

2. Newlyweds: gift your partner the ultimate security of insurance

Post-marriage, we start a new life and build a new lifestyle. We don’t have an emotional dependency on each other; there is a financial dependency too.  So, while we are still lost in the roses and chocolates, do take time to purchase a gift that will secure your partner’s future life. Buy Life Insurance.

3. Taxpayers: who doesn't like an extra penny saved from tax

Life Insurance premiums fall under tax exemption under Section 80C of the Income Tax Act. The payouts from Insurance are also exempt from taxation, subject to some T&C under Section 10(10 D) of the Income Tax Act. Hence, Insurance is a wise investment when it comes to securing life as well as saving tax.

4. Retirees: financial security is necessary at every stage of life

While waiting till the retirement age to buy life insurance is not a very recommended decision, buying Insurance at any life stage only adds to building a corpus. If retirees need life insurance or additional Insurance for any reason, they can always buy life insurance.

5. Home Loan Borrowers: focus on your Dream Abode

The purchase of a home is a huge expense, and if done through a Home loan, it’s a huge liability. Unfortunately, if the primary earner passes away, it would be difficult for the dependents to pay off the home loan. Life Insurance provides this assurance that the burden of a loan would not come on the family members in such unfortunate circumstances.

The Contract

An Insurance Plan is a legal contract between you and the insurance company. The policyholder agrees to pay a certain amount to the insurance company, known as the Premium. In return, the insurance company agrees to pay a specific sum of money, called a Death Benefit, to the beneficiary in case of death of the Life Assured during the term of the policy. 

Some Insurance policies have a savings component too and they provide Maturity Benefits. The person who pays the premium for the coverage is the policyholder. A policyholder can buy coverage for themselves or any family member. The person who is covered by the insurance is the Life Assured.  

The Application Process

To buy Life Insurance, you need to fill out an application form declaring your information like medical history, current health conditions, lifestyle habits, hobbies, age, annual income, and nature of your profession, apart from the basic personal details. This helps the insurer assess your risk level and arrive at the premium accordingly. Factors that affect premium include age, lifestyle habits like smoking, drinking, health issues, hazardous professions and similar factors. 

Assessing Your Requirements

• Assess the Cover Required: Decide the Life Cover that would be sufficient to take care of your family's needs in your absence. Check out the methods discussed further to do the same. 
• Choose the Policy Term: Choose a policy Term depending on the duration you feel your family would need the coverage. It's usually until the children become educated and employed or till your retirement. 
• Choose the Premium Payment Mode: You can go for one-time premium payment or Regular Payments. Under Regular payments, too, there is the option of annual, quarterly, or monthly premium payments. 
• Choose the Payout Option: You can choose a Lump Sum payout wherein your family would take care of the bulk financial requirements and invest the rest. However, if you are not sure they would be able to take care of the same, you can choose to optimise in the form of staggered or regular payouts that will ensure your family is paid regularly for their financial requirements. 
• Check out the Riders: You can always improve your policy with increased coverage and for various other situations by adding up Riders in your base plan. 

Assigning a Nominee

One of the most critical steps while buying an insurance plan is to appoint a nominee. A nominee is a person, usually a close family member, authorised to receive the insurance payout, i.e. the Death Benefit in case of the policyholder’s demise.

Here are the most common seven factors that affect a Life Insurance premium: 

1. Age

The topmost factor affecting your Life Insurance premium is your age. A younger age means fewer chances of developing any life-threatening ailments and a long premium payment term. This translates to lower premiums at lower ages that, in turn, increase with age.  

2. Term

The Insurance Premium directly depends on the period and increases with the increasing term, considering the older and the riskier years of life. 

3. Medical History

Insurers usually ask for medical checks before issuing a policy, and they assess the health records, especially any serious ailments or family history. Other body metrics like cholesterol, BP, etc., are also considered since any health risk would mean a higher chance of a Life Insurance claim, which results in a higher premium.   

4. Current Health Condition

While issuing the policy, a health assessment of the prospective policyholder is done to ensure they do not suffer from any serious ailment that might pose a life risk and thus increase the policy's premium.  

5. Occupation

Your premium is also affected by the profession you are in. People in professions where they are directly exposed to life risks, like soldiers, mine workers, etc., are charged higher premiums.

6. BMI

A skewed BMI index can directly mean that you are at a health risk, increasing your premium.

Read More: BMI Calculator

7. Lifestyle Habits

Smoking, Alcohol consumption, inclination towards adventure sports, all these lifestyle habits increase your premium.

A rider can be an extension to your base plan, with an additional premium that provides additional coverage for various situations.

Below are some of the significant Riders in Life Insurance:

1. Accidental Death Benefit Rider

Accidental Death Benefit Rider provides extra coverage to the dependents in case of accidental death of the life assured. This is over and above the basic coverage the insurer already provides in the base plan.

In fatal accidents, the medical interventions that go into saving the victim's life hit the family's finances. In many cases, the victim eventually dies, and the family then deals with the personal loss in addition to this financial loss. 

To cover these scenarios, in cases where the life assured does not immediately pass away after an accident, the Accidental Death Benefit rider provides the Sum assured to the nominee within 120-180 days from the date of the accident. Hence, Accidental Death Benefit is one of the most significant Riders that must be added to the basic insurance policy.

2. Critical Illness Rider

A Critical Illness Rider provides financial coverage in case the life assured is diagnosed with any critical illnesses as mentioned in their policy document. For example, cancer, heart ailments, and tumours are some critical illnesses.

The Critical Illness Benefit is provided to the life insured to meet the treatment and household expenses in those times of need. It acts as an Income Replacement plan and ensures that the treatment of the policyholder, as well as the finances of the family, are not hit because of the illness.

3. Accidental Total and Permanent Disability Benefit Rider

This rider takes care of the finances in case the life assured suffers an accidental partial or permanent disability and, thus, becomes unfit to carry on with any occupation.

For example, loss of both eyes and legs, both arms or one arm and a leg, can be classified as a permanent disability. Such kind of disabilities leaves a person incapable of leading a normal life where they can take up a job and earn for their family. In such cases, the policyholder is paid a specific portion of the Sum Assured regularly for a few years, which takes care of the finances for the most challenging years of the family.

4. Waiver of Premium Rider

Waiver of Premium Rider ensures that the policy stays active even when the policyholder cannot pay premiums due to physical disability.

With this rider, the premiums are waived, and the policy continues till maturity. On maturity, the benefits are paid to the nominee.

This rider can be availed in cases where:

• The life insured has been disabled for six months or more.
• When life insured is diagnosed with any of the critical life-threatening ailments.

5. Terminal Illness Rider

Also known as Accelerated Death Benefit Rider, this rider ensures the Sum Assured is paid to the policyholder on the diagnosis of any terminal illness.

Terminal Illnesses are ailments with a high likelihood of death within six months. In these types of illnesses, in addition to the eventual personal loss of the family member, the finances are also hit badly during the treatment.

A Terminal Illness Rider provides much-needed financial freedom in those times of need to put finances in order, take care of medical support, or travel. This rider comes into effect only after the diagnosis and short life expectancy confirmation. 

6. Income Benefit Rider

Life is full of uncertainties, but it's up to us to plan well for all those lemons that life might throw at us. When you buy insurance, you have taken an essential step towards securing your family's future. However, there is always scope for better planning.

Under usual circumstances, insurance pays off the death benefit as a lump sum in case of the policyholder's demise. But, with Income Benefit Rider, if the policyholder dies during the policy term, the family receives a certain monthly payout with which they can manage their finances better. It acts as a substitute for monthly income in the absence of the policyholder so that the family doesn't struggle to pay bills.

Insurance claims are broadly classified into the following two types:  

1. Death Claim

In the unfortunate event of the policyholder's demise during the policy tenure, the payout is paid to the nominee, as agreed in the policy terms. This payout is known as Death Benefit. While the documents might differ across insurance providers, below are the most common documents required to file a death claim: 

• Filled form 
• Original Policy Bond or Contract 
• Policy holder's Death Certificate  
• Proof of identity as the nominee

2. Maturity Claim

Maturity Benefit is the amount the Life Insured receives if they survive the policy term and the premiums are all paid. Additionally, the policy must have the maturity benefit as a component because, in the case of Life Insurance, mainly Maturity Benefit is absent.

To avail of the maturity benefit, usually, the following documents are required; however, they may differ from one insurer to the other:

• Maturity Claim Form 
• Original Policy Bond