Simplifying Life Insurance in India

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What Are the Characteristics of Life Insurance?

Human life is susceptible to uncertain incidents that can disrupt the flow of life of closely associated individuals. Therefore one chooses a life insurance policy to safeguard the financial requirements of their family when they are not around anymore.

Life insurance policies are available in various formats, often confusing buyers who aim to get the maximum coverage per their budget. Thus to ensure peace of mind, you must know the characteristics of life insurance policies so that it becomes easy for you to choose one.

6 Key Characteristics of Life Insurance Policies

In this section, we are about to list and briefly explain characteristics of life insurance plans to develop a complete idea for potential insurance buyers.

1. Life Insurance Policies Provide Long-Term Financial Security

The insurer allows a policyholder to avail life insurance benefits for an extended period ranging from 10 to 30 years. This tenure is referred to as the policy term. The insured person must pay a pre-agreed premium throughout this period to ensure that their beneficiaries receive the assured cover if they pass away.

2. The Policyholder/ Life Insured Must Enlist Beneficiaries or Nominees

When applying for a life insurance policy, you must list the names of beneficiaries. The nominees can be your parents, spouse or children, whomever you choose. If you have not selected any nominee, the legal heir is automatically entitled to be awarded the guaranteed sum after your demise.

3. Premiums Can be Furnished Monthly, Annually or Even Settled Through a One-Time Pay

Depending on your budgetary constraints, you can negotiate with the insurers regarding a favourable payment method. In return, the insurance company will provide insights and guide you through actions likely to reap the maximum benefits at an affordable price.

Nowadays, more premium solutions like bimonthly, quarterly and half-yearly payment structures have also been introduced.

4. Depending on the Type of Life Insurance Policy, It Can Be a Post-Retirement Solution

Specialised annuity plans provide lifelong monthly payouts based on the sum accumulated from paid premiums. For example, suppose you intend to contribute more actively to your retirement fund corpus. In that case, you can buy these insurance policies that generate a regular source of income instead of a lump sum amount.

5. The Sum Assured Is Free of Taxes

The compensation provided in the form of death benefits is fully tax-exempt except in some cases. Moreover, the bonuses accumulated throughout the policy term are tax-free as per Section 10(10D) of the Income Tax Act.

6. Life Insurance Can Provide Protection Against Critical Illness and Permanent/Temporary Disabilities

When combined with a term plan, effective riders can help protect the life insured as well as safeguard their family's financial needs. One of the critical characteristics of permanent life insurance policies is that you get the option of clubbing add-ons like critical illness coverage or disability benefits. Upon adding these particulars, if you, unfortunately, lose your job due to a temporary disability caused by an accident, you or your beneficiaries can file a claim for the sum insured.

FAQs about Characteristics of Life Insurance

What are the actual benefits of owning a life insurance policy?

The main benefits you can enjoy after buying life insurance are:

You do not need to worry about the living expenses of your family.
Insurers often cover treatment costs of critical illness, so you do not need to worry about medical expenses.
You can reduce taxable income and plan for post-retirement life systematically.

Under what circumstances life insurance companies can reject claims of death benefits?

Listed beneficiaries do not get the sum assured in a life insurance policy if the life insured expires due to self-inflicted wounds. Moreover, deaths caused by natural calamities or war-like scenarios are also not held as a reason for a valid claim.

What are the types of life insurance?

Three types of life insurance policies mainly exist in India. These include term insurance plans, whole life insurance policies and ULIPs.

What should I consider when choosing a life insurance company?

When choosing life insurance companies, consider financial strength, product offerings, customer service, claims process, reputation, price competitiveness, policy flexibility, and additional services. These factors ensure you select a reliable insurer that meets your needs and provides financial security for your loved ones.

Do term insurance companies offer long-term plans with flexible options?

Yes, many term insurance companies in India offer long-term plans with flexible options. These plans often include features like adjustable coverage amounts, term plans with return of premium, increasing coverage, premium payment terms, and additional riders for critical illness or accidental death benefits.