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Ensuring your loved ones are financially secure after you're gone is certainly not the most comfortable topic to discuss. However, the concept of life insurance aims to tackle just that. Life insurance products have evolved over time and no longer cater to the one-size-fits-all approach. Instead, they are more need-based and offer numerous benefits over and above protecting your family.
Let us delve a little deeper into this topic to learn more about this financial product and answer some crucial questions that may be on your mind.
Life Insurance is a contract between an individual and the insurance provider, represented through a policy. The policyholder pays the premium, either a regular premium over a period of time or a single premium upfront. Against this premium, the insurance provider provides financial protection to the nominee (beneficiary) in case of the policyholder's death. This is called a Life Cover.
This Life Cover acts as a support for the grieving family. Although money cannot fill the void or make up for the loss of the loved one, it can, to an extent, help overcome financial hiccups that a family might face after the breadwinner's death.
Alternatively, in some life insurance types, if the policyholder survives the policy term, he may receive a lump sum called maturity benefit upon the policy's maturity. In simple terms, life insurance pays out a lump sum amount to your beneficiaries in case of the death of the life insured. However, there are several types of life insurance wherein you get more than just the coverage.
When you buy a life insurance policy, you must pay a certain premium, which is determined by the insurance provider based on various factors. In case of any eventuality during the policy term, the insurance provider will pay a death benefit to your beneficiary. Your beneficiary may use this aid to settle your healthcare and funeral costs, repay debts, a fund for child's education or for any other purposes.
If you survive the term, a maturity benefit shall be paid (in some insurance types) to the policyholder. These funds, again, can be utilised to fulfil any financial need or goal.
Let us understand by taking an example.
Amit wants to protect his family in case of an unfortunate event of his early death. So, he buys a 20-year life insurance policy with a sum assured of ₹1.5 Crore and by paying a premium amount of Rs 20,000 every year. The sum assured is payable as a death benefit if Amit dies within the policy term and as a maturity benefit if Amit completes the policy term.
Scenario 1: If Amit survives the policy term.
Amit had paid a total premium of Rs 20,000 every year till the end of the policy term and will receive a maturity benefit as per the policy eligibility criteria along with a bonus (if any) on maturity. Post this insurance payment, the policy ceases to stay in force.
Scenario 2: If Amit dies during the policy term.
The beneficiary (nominee) will receive the sum assured of 1.5 Crore upon the death of Amit. The policy will terminate after the death benefit is paid. The sum assured received can be used to meet the same lifestyle and fulfil any obligations.
Thus, we can learn that life insurance policies can be highly versatile. It is not just a tool to secure your family's financial needs after your death but also aids in achieving your long-term financial goals. For example, you can utilise the corpus created from life insurance to pay for your child's higher education.
A life insurance policy is worth buying for individuals with one or more dependents. It protects against risk and offers opportunities to grow your investments and savings. Let us look at some of the benefits of life insurance.
Provides Financial Protection
Inculcates A Habit of Savings
Offers Tax Benefits
Fulfil Long-Term Financial Goals
Get Assured Returns
Now that you know life insurance's meaning and benefits, let us look at the main types of life insurance plans.
Term life insurance plans are also known as pure risk cover, as their main aim is only to provide financial protection without any saving or investment component. As a result, the premiums for term plans are relatively lower than other life insurance plans. Tata AIA Term Insurance Plans offer comprehensive protection to your loved ones at affordable premiums.
A Non-Linked Non-Participating Individual Life Insurance Plan (UIN:110N160V03)
Guaranteed returns or savings insurance plans are a combination of insurance and savings. If the policyholder outlives the policy term, the insurer provides a maturity benefit. Some savings plans offer a regular payout during the policy term, which can help achieve short-term financial goals. Savings Plans from Tata AIA Life Insurance help you achieve all your financial goals with guaranteed returns and insurance cover.
Non-Linked, Non-Participating, Individual Life Insurance Savings Plan (UIN:110N158V10)
ULIPs offer dual benefits of insurance and market-linked investments. The premium paid is split for protection and investment purposes. Depending on your risk appetite, you can invest in various types of funds offered by the insurance provider. With Tata AIA ULIP Plans, you can choose from multiple fund options depending on your insurance and investment needs.
In this policy, the investment risk in investment portfolio is borne by the policyholder.
Unit Linked Individual Life Insurance Savings Plan (UIN:110L112V04)
Retirement plans help build a stable financial income for an individual during his post-retirement period. This type of insurance plan typically offers annual payouts or a single lump sum payout during your retirement years. Tata AIA Retirement Solutions helps you enjoy your retirement without worrying about your finances.
A Non-Linked, Non-Participating, Annuity Plan (UIN:110N161V06)
Buying life insurance online is undoubtedly one of the best ways to purchase insurance coverage. The online method makes the purchase process convenient, swift, hassle-free and timesaving. In addition, you can learn about product features, benefits and other life insurance details, compare plans easily, customise plans, pay as per your convenience, get access to 24X7 digital self-service and much more in the comfort of your home.
Life insurance is undoubtedly one of the best ways to protect your loved ones. However, the premium varies on various policy-specific and personal factors. For example, chances are dim that two people with different ages or medical histories opting for the same plan will have the same premium. Likewise, an individual opting for two plans will have different premium amounts.
Let us demystify them based on personal factors and policy-specific factors.
Age: Young individuals are less likely to suffer from age-related illnesses. It is thus always recommended to buy a policy in the early stages of life since the premium amount is less. With increase in age your premium amount may also increase.
Gender: Studies and statistical evidence show women have higher life expectancy than men. Hence, women can avail of their policies for a longer tenure than men, which leads to lower premiums.
Medical history: If you have a pre-existing disease, the premium would be higher as compared to a person with no medical condition.
Family health history: If a particular hereditary illness runs in your family, the premium charged would be higher.
Smoking and drinking alcohol: Smoking and drinking alcohol harm health in more ways than one. Therefore, insurance providers charge higher premiums for smokers and drinkers.
Profession: A person working in a workplace (on-site typically) that is harmful to health, like in a mining factory, oil and gas etc., will attract higher premiums than a person engaged in a regular office job.
Amount of coverage: Higher the sum assured higher will be the premium, and vice versa.
Type of plan: Term insurance typically has lower premiums than ULIPs or other life insurance plans.
Riders: Riders^ enhance the overall coverage but come at a cost. It is thus vital to weigh the cost and benefits before opting for a rider.
Our experts are happy to help you!
Why should I purchase life insurance online?
Purchasing a life insurance policy online helps you make an informed decision.
What is a life insurance premium?
The amount of money a policyholder pays to the life insurance company in return for the coverage is a life insurance premium. The premium can be a lump sum amount or regular periodic payments.
How much life insurance coverage do you need?
Life insurance coverage requirements differ for individuals. However, the coverage should ideally be adequate to support your family financially after your death. You can calculate this amount by measuring your human life value (HLV). HLV is the sum assured and the financial estimation of your life's worth. Use the Human Life Value Calculator to know yours.
What is the cost of life insurance in India?
The cost of life insurance or the premium depends on numerous factors, as discussed earlier in the article. However, price should not be the only determinant when buying an insurance plan. You can check your estimated premium by using our premium calculators.
Is buying life insurance worth it?
Many reasons make buying a life insurance plan worth it. Some of them are:
Why should I purchase a life insurance plan?
A life insurance plan is an effective financial planning tool. Consider the below reasons to purchase life insurance.
How many beneficiaries can I add to my life insurance plan?
You must add at least one beneficiary to your life insurance plan. The beneficiary can be your spouse, children, relative, business partner or trust based on the terms and conditions of your selected plan.
Additionally, you can provide a primary and a secondary beneficiary, wherein if the primary beneficiary is dead, missing or unavailable, the benefits can be transferred to the secondary beneficiary.
What is the best type of life insurance policy?
The best type of life insurance policy for you depends on your needs, goals and budget. Life insurance policies are now designed to cater effectively to every individual. Customisation (by way of riders) also helps enhance your coverage. Click here to learn more.
What does life insurance not cover?
Life insurance policies are subject to terms and conditions relating to certain kinds of deaths or other exclusions. Some of these exclusions include:
Does a life insurance plan have maturity benefits?
Yes, term insurance with return of premium (TROP plans) and endowment plans (Savings Plan) offers maturity benefits.
What is a "free look period" in life insurance?
The free look period is the time the regulator (IRDAI) gives to the policyholder to assess and review the policy document. If you are unsatisfied with the policy features, exclusions or inclusions, you can terminate the policy within the free look period without attracting any penalty.
What is the eligible age for having a life insurance policy?
The eligible age will vary as per the product eligibility criteria. The minimum age for purchasing a life insurance plan in India is 18 years, and the maximum entry age is 65-70 years, based on the type of plan.
What are the flexible features of a life insurance plan?
Life insurance plans offer flexibility to the policyholder to make modifications depending on their changing needs. For example, you can change the size and tenure of the cover, top-up your premium, modify or switch investment plans, or opt for a flexible settlement option, among others.
Is life insurance an asset or liability?
Even though you pay periodic premiums for your life insurance plan, it can still be considered an asset. A life insurance policy with returns is an asset as it builds a cash value, and you get financial benefits while alive. Pure insurance plans, like term insurance, are an asset as they pay out a corpus to your family and help their financial security.