Everything Important to Know About Death Benefits of Life Insurance

Before the individuals apply for the policy, they should be aware of what is covered under the benefits. 

1. In case of suicide - The death benefits will only be available to the beneficiaries, only if the suicide occurs at least a year after the policy. If it takes place within the first year, then the death claim will not be awarded to beneficiaries.

2. In case of an accident - The person should not be intoxicated during the accident. If the postmortem report suggests otherwise, then the death benefits will be waived.

3. In case of death due to illness or natural cause - It is covered by all the life insurance plans and term insurance plans in India.

There are certain types of deaths that are not covered by the usual term policy. They are compiled below-

1. If the policyholder dies during a hazardous activity not covered by the insurance. The same applies to death through self-inflicted injuries.

2. The death benefit insurance will not be awarded to a person who dies of an STD.

3. The death benefit will also be refused if the policyholder dies due to drug or alcohol abuse.

4. The death of the policyholder during a natural disaster also allows the insurance company to waive the death benefits.

A policyholder can also enjoy term insurance premium tax* benefits. Concerning the premium paid, the holder can avail of a deduction of up to Rs. 1,50,000 per year under Section 80C of the Income Tax Act, 1961. In the event of the person’s unfortunate demise, the nominee can avail of death benefits which are tax-free* as per Section 10(10D) of the Income Tax Act, 1961. Thus, term insurance with a return of premium covers major risks and challenges of the family for a lifetime.

Several types of life insurance policies provide death insurance benefits, each designed to address different financial objectives and life stages.

• Term Insurance Plans: Term insurance is a policy that provides “pure life cover,” meaning that if the insured dies during the term of the insurance, the agreed-upon benefit amount will be paid to the nominee. These plans are frequently favored for very high coverage at relatively low premiums.

• Endowment Plans: Endowment plans are a combination of insurance and savings. In addition to insuring against death, they can also provide a maturity benefit in case the policy holder lives up to the term of the policy.

• Whole Life Insurance Plans: Whole life insurance covers the insured until a certain, advanced age. Such policies guarantee that the proceeds of the death insurance will be paid to the beneficiaries when the insured person dies as long as the conditions of the policy are met.

• ULIPs (Unit Linked Insurance Plans): ULIPs, as the name suggests, are life insurance plans that have a market linkage. If the policyholder dies while the policy is in effect, the nominee will receive the money from the death benefit life insurance payment as per the policy terms.

• Retirement and Pension Plans: If a life insurance policy contains death benefit provisions, these can help provide financial protection for family members in the event of the policyholder's death before retirement, or while the policy is in the payout phase, as is the case with certain retirement-oriented life insurance plans.

• Tata AIA Life Insurance Solutions: Tata AIA offers a range of life insurance products, including term plans, savings plans, wealth creation solutions, retirement plans, ULIPs, and whole life insurance options. These products are designed to provide financial protection while helping policyholders work towards long-term financial goals. 

Depending on the chosen product, customers may benefit from flexible premium payment options, life insurance riders¹, wealth accumulation opportunities, retirement planning features, and eligible tax benefits* under prevailing tax laws. Optional riders¹ can further strengthen protection by covering specific risks such as accidental death, disability, and critical illness.

The nominee in the life insurance death policy is the one who gets the death benefit when the policy holder dies. The benefit may be paid to the legal heirs/representatives as applicable in the law in the absence of a nominee or if the nominee is not legally eligible to receive the proceeds, as per the terms of the policy. 

To claim death insurance benefits requires presenting specific paperwork, usually including the death certificate, policy documents, proof of identity, bank account information, etc., and anything else the insurance provider asks for in the process of evaluating a claim.

Insurers may offer multiple payout options for death benefit insurance proceeds, including:

• Lump Sum Payout: The entire death benefit amount is paid at once. 

• Regular Income Payout: The nominee receives periodic payments over a predefined period. 

• Lump Sum Plus Income: A portion of the benefit is paid immediately, with the balance distributed as regular income. 

• Structured Settlement Options: Some policies allow customised payout structures based on the family's financial needs. 

Choosing an appropriate payout option can help beneficiaries manage expenses effectively and maintain long-term financial stability after the loss of a loved one.

You must understand your requirements and look at all the options available before purchasing term insurance. Here are a few reasons why anybody should go for a term plan. 

Low Premium

The premium of term insurance is lower than any other insurance plans as it only provides life protection without any other investment element attached to the insured amount. It offers the highest death benefit at a nominal premium where often the individual has to pay less than one present of his or her annual income.

Wide range of tenure

One can purchase a term plan for as low as 10 years and as high as having life cover up to the age of 70 years. In case a person has taken a short term loan, like a personal loan or home loan, he or she can avail of shorter plans. A longer plan can cover the costs of multiple loans.

Addition of riders¹

Certain plans allow the policyholder to add insurance riders¹ as per the requirement. Some of the riders¹ include covers for critical illness, permanent or partial disability, accidental death and other unfortunate events. The inclusion of riders1 comes as an added advantage only at a nominal fee.

Tata AIA term insurance policies allow flexibility to the policyholder. They can choose the options that best fit their lifestyle. The term policy also covers hazardous activities due to professional endeavours. The professional’s jobs include mining, oil drilling, etc., allowing the individual a sigh of relief. The premiums are also significantly low as compared to the coverage that it provides.