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Life Insurance has become an important topic for discussion. The recent Covid-19 pandemic has had a severe impact on the lives of many people. Children, older people and other dependents have been left stranded when the only earning member lost their life.
The importance of life insurance has now made people understand the need for financial planning and how savings and insurance can satisfy their needs. We should identify our long-term objectives, financial commitments, and ways to protect our family's financial well-being at all stages of life.
Life Insurance is a contract between an individual and an insurance company. The individual pays premiums to purchase life insurance. Life insurance acts as a financial cover and is given as the sum assured. There are a variety of insurance products available. Based on the type of plan chosen, the insurer will pay the lump sum amount to the policyholder when the plan matures or to the nominees if the policyholder dies.
It is necessary to provide for all the financial obligations in the absence of the earning member. The sum assured can be used to manage daily expenses, settle debts, and meet long-term plans and important milestones such as children's education, marriage, career ventures etc.
Here are some basic facts that you need to know about life insurance. It is important to consider these facts while purchasing a plan.
The premium amount is the regular amount you pay to the insurance company corresponding to the sum assured. It is based on your age, lifestyle and any pre-existing illness. The insurance company will consider the above and use a statistical method to calculate the risk involved in the death.
The life insurance premium rate will be based on this factor. It is best advised that you purchase life insurance at a younger age, perhaps when you start earning. It has the advantage of a low premium amount as health is robust. You can pay the premium amount in a comfortable frequency such as monthly, half-yearly or annually.
It is the amount that you get as a lump sum when the policy matures or as a death benefit to the family members. It cannot be any random amount. Make sure you consider all the expenses associated with you and your family to derive the value.
Based on your lifestyle and food habits, you can arrive at the monthly expenses. Add other liabilities such as education loans, home loans etc. Also, add your long-term objectives such as children’s education, marriage, career etc. Subtract the amount you will be able to pay as liquid cash through other savings and investment proceeds. The value derived will have to be your life coverage.
Choose insurance plans based on the policy tenure you can afford so that the computed sum assured gets you the best benefit.
Death and Maturity Benefit
There are two types of benefits in insurance. The death benefit is the sum assured provided to the family in the case of the policyholder's death. It is the basis of a term life insurance policy.
In savings or investment-based life insurance plans, the maturity benefit is provided to the policyholder if he outlives the policy term or the nominees if he dies unexpectedly.
For example, with guaranteed1 return insurance plans, you can pay premium amounts to get the sum assured along with guaranteed1 additions. The amount can be received as a lump sum, a combination of lump sum and regular income or regular monthly income for a specific period of time.
Choose the best insurance plan that will suffice your needs appropriately.
Generally, people believe that insurance will pay the sum assured to the family members upon the insured person's death. However, there are additional riders# that can enhance the plan and increase the coverage of sum assured.
For example, the accidental benefit rider# will make the amount payable when the insured person dies due to an accident as against natural death. The terminal illness or the critical illness rider# will ensure the amount payable when the policyholder is first diagnosed with the illness. Other riders# also waiver future premium payments when the policyholder gets affected due to a total and permanent disability. Tata AIA plans offer a variety of riders# to increase the insurance benefits.
According to the Income Tax Act of 1961, the premium paid towards life insurance plans qualifies for a tax* deduction. As per Section 80C, the annual premium paid up to Rs. 1,50,000 is eligible for deduction while calculating the taxable income. In addition, there are insurance plans in which the maturity benefit or the return is exempted from income tax* under Section 10 (10D). There are terms and conditions associated with every plan. Read the policy document before you make a decision.
A basic life insurance plan is not essentially an investment. It will serve as a savings plan for your family members and provide financial security under your unexpected demise. However, the insurance industry has increased the investment options with life insurance plans. Unit Linked Insurance Plan is an endowment plan, wherein one part of the premium goes for the life coverage and the other for investments in equity, debt or hybrid funds.
We have seen what life insurance means, why it is important, and the six important facts that you should know. By planning your financial expenses and income, you can allocate a budget towards paying your monthly premium. There are a variety of plans available to ensure your financial security.
Analyze your plan, check the different products available and compare life insurance policies. Research, customize and avail the best product based on your premium paying capacity. Finally, plan and invest early so that you get discounted premiums, and a large sum assured. Keep these six facts in mind while you get your first insurance policy!
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Insurance cover is available under the product.
The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not guaranteed issuance plans, and they will be subject to Company’s underwriting and acceptance.
For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
* Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility for tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
#Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch
1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry
IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER
THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.
Past performance is not indicative of future performance.
All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.
Please make your own independent decision after consulting your financial or other professional advisor.