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Life Insurance


In simple terms, Life insurance provides cover for your life in return for an annual premium paid by you. Life insurance is a contract between the person and the insurance company that is providing the insurance. If the person dies, or becomes terminally ill while the contract is in force, the insurance company pays a specified sum of money free of income tax, also called cash benefits to the person or to his/her beneficiaries as mentioned in the insurance policy. The insurance offers a way to replace the loss of income of that person.

Life Insurance is a source of protection and provides financial stability to the beneficiaries after one’s death or terminal illness. It can also be a form of savings in the long run if one purchases a plan, which offers the option of contributing regularly.

Types of Life Insurance

Term Insurance Policy

Term insurance is a very straightforward and simple policy that offers a pure risk cover i.e. the insured amount will be paid only if the policy holder dies or becomes terminally ill during the policy period.

For example say Person A takes a term policy of Rs.200000 for 10 years . Unless Person A dies or becomes terminally ill during this 10 year period, he or his nominees will not be eligible for any kind of compensation from the insurance company. Term insurance policies are least expensive of all the life insurance policies.

Endowment Policy

Endowment Policy is a term insurance policy with a savings component built into it. Unlike term insurance policy where the person does not get maturity benefits after the policy period expires, endowment plans provide benefits like profit and bonuses and has a maturity value attached to it.

Whole Life

As the name suggests whole life policies are permanent insurance plans where the policy is valid as long as the person is alive. Whole Life Insurance Plans are permanent Insurance plans which run as long as the Policy Holder is alive. The Insured pays the premium amount throughout his/her life time. The beneficiary of the policy receives the coverage amount plus the interest and accumulated bonus only at the time of Insured’s death.

Money Back

The insured, as long as he is alive receives money, also called survival benefits at regular intervals during the term. These policies cost more than endowment policies.

Retirement Plan or Pension Plan

Retirement plan or Pension plan help you plan for the retirement. Here the customer receives a regular pension post his retirement age. These are pure retirement plans where insurance cover will not be available. Customer has the option of choosing his vesting age (Pension age)

Child Plan

A child plan is basically a saving tool which helps in meeting your child’s needs in the future. With rising cost of education, establishing a professional career or even a simple wedding, a comprehensive child plan can help you save early to reap benefits later.


ULIP stands for Unit Linked Investment Plan. This is life insurance coverage clubbed with investments in market linked instruments – Debt and Equity markets. Thus there is a twin benefit of getting insured and also getting returns on investments. But there is a catch; the policyholder has to bear the risks related to stock markets.

Why do you need it?

A simple way of explaining is… Say you're 35, you support a family of two and you spend 20,000 rupees per month. You have additional expenses as weekend holidays, shopping spend of about 1.6 lakh rupees a year and you end up with annual expenses of 4 lakhs a year. If you die or become terminally ill now, and your family continues to have the same expenses at 6% inflation for the next 30 years, you will need nearly 3.4 crores. If you are the sole earning member / bread winner, your family would face economic hardship in the years to come. There is need for some sort of security coming in the form of money and hence the necessity of getting a life insured. Families with young children have a clear need for life insurance.

If both spouses work, the loss of one income will cause the family immediate economic hardship and make it harder for them to realize future goals, such as paying for the children's education. But even if one spouse works ''inside the home'' and doesn't bring in a formal income, his or her death will require the surviving spouse to hire child care, housekeepers and other professionals to help run the household - and that can be a significant new expense.

Tips for buying Life Insurance

  • As per Life Insurance research, every individual should have 20 times of their Annual Income as Life coverage.
  • Ask yourself as to why do you need Life Insurance. Buying a life policy just because it sounds good is not a good idea. There are different plans available that suit at different stages in your life.
  • If you are looking for life-long protection until premature death, retirement income or cash benefits then you can opt for insurance with maturity benefits or specific returns. On the other hand, if you are looking for life cover for a specified period of time, term insurance may be the right choice.
  • If you are looking for Investment opportunities through Insurance coverage there are ULIP (Unit Linked Investment Plans) products. But the returns are not guaranteed as you have to bear with the risks associated with stock markets. Moreover there are hidden charges like allocation charges, handling charges.
  • Research as much as you can, it pays to search extensively as premiums may vary for the same type of cover. Purely depending on an agent is not good as he might try to push one specific product and you stand to lose by missing out on other better policies.
  • The healthier you are, the lesser is the premium. You might be asked to pay more for anything that shortens your life expectancy (for example smoking, excessive alcohol intake, being overweight etc).
  • Be honest in filling the details in the application form. If you lie or omit information, your life insurance company will terminate your coverage.
  • When looking for insurance start early to reap maximum benefits. The earlier you buy, lesser the premium compared to buying at a later stage as you might be a greater risk of certain health related conditions and diseases.
  • There are many add ons that insurance companies try to sell to you. These add ons may look very good but nine out of ten times they just drive the cost of your policy up. Most people will find out that they do not need these extras and are just a waste of money.
  • An insurance policy is only as good as the company that backs it. Do take a look at the credit rating of the Insurance company and also at the number of genuine claims it has accepted. These statistics can be got from any credit rating agency and is available online.



1. What are the advantages of having Life Insurance?

  • provide security for your family
  • protect home mortgage
  • take care of estate planning needs
  • look at other retirement savings/income vehicles
  • Save Tax - You can avail tax benefits on the premium paid under Section 80c and Section 10(10D) of the Income Tax Act.

2. What happens to a family which does not have enough coverage?

Under any circumstances, the loss of a loved one is a traumatic experience. But, if the family is left without sufficient money to meet basic living needs or prepare for future goals, they will have to cope with a financial crisis at the same time. Depending upon the current financial resources and ability to ''get back on their feet'' emotionally and financially, the family might be forced to move to a less desirable home or community, abandon education and career plans, re-order family priorities (such as the amount of time spent with the children) and, in general, cut back on the quality of life which was worked hard to achieve.

3. How does one decide the Maximum Sum Assured?

There are certain factors you should consider such as your annual income, other sources of income, number of dependants, debts and your lifestyle. The general guideline as per ----------- is each individual should have a life insurance of twenty times of their annual salary.

4. What is a Rider?

Similar to a top up, a rider is a supplementary insurance policy that becomes part of basic insurance policy and helps in expanding the scope of benefits.

5. What are 10 reasons for buying life insurance?

  • Life insurance if planned appropriately will provide funds on premature death to deal with debts, mortgages, and living expenses. It offers protection to the family left behind and serves as a cash resource
  • It secures hard earned estate on death by providing tax free cash which can be utilized to pay estate and death duties and to tide over business and personal expenses.
  • Life insurance can have a savings or pension component provision during retirement.
  • Some policies have riders like coverage of critical illness or term insurance for the children or spouse. There are certain rules regarding eligibility for riders which you will need to determine clearly.
  • Having a valid insurance policy is considered as financial asset which improves credit rating when in need of health insurance or a home loan or business loan.
  • In case of bankruptcy, the cash value as well as death benefits of an insurance policy is exempt from creditors.
  • Life insurance can be planned such that it will cover even your funeral expenses.
  • Insurance protects businesses from financial loss or any liabilities in case the business partner dies.
  • It can contribute towards maintaining a family’s life style when one contributing partner suddenly dies.

Term Plan:

a. In a Term plan do you have accidental rider benefit?

Yes, an accidental rider benefit similar to accidental policy is available.

b. On what basis is the maximum Sum Assured that can be covered?

There are two main factors that will decide your maximum Sum Assured - your Annual Income and source of income.

c. Do you have any maturity benefit in Term insurance plan?

No, Term insurance plans are purely life insurance plans which do not have any maturity benefit.

Endowment Plan:

a. What is the difference between Endowment & ULIP plan?

In Endowment plans Fund management & Returns are not based on market conditions, bonus is declared every year, gets accumulated and is given back to customer at the end of the Policy term. In ULIPS the returns are based on market risks and are not guaranteed.

b. Can I take a loan on Endowment plan?

Yes, you can take a loan in endowment plan.

c. Can I take a rider benefit on Endowment plan?

Yes, customers can opt for any riders on top of the basic insurance coverage

d .What type of returns can I expect from Endowment plan?

Returns typically will be Bonus declared, Rider benefit if any and Sum Assured (if need arises).

Money Back Plan:

a. Can I take a loan on Money back policy?

No, you cannot take a loan on this plan.

b. Can I take rider benefit on Money back policy?


Whole Life Plan:

a. What is the difference between endowment plan and whole life?

In Endowment, the policy will be closed at the maturity period and returns are paid to the customer. In whole life, the insurance coverage continues throughout his / her life time. Returns are paid either after premium paying term or during the premium paying term as Money back.

b. What will be my returns?

Returns will be Bonus. declared during premium paying term / throughout life time (till 100th birthday) plus Rider benefit if any and Sum Assured (if need arises)

ULIPs Plan:

a. What are the different options of investment in a ULIP plan?

You have the options to invest in Equity or Debt instruments or a combination of both.

b. What are the fund options available in ULIP plan?

There are three fund options available - Growth, Balanced & Debt.

c. What is my allocation charge and for how many years do I have to pay?

Allocation charges depend on the product and insurance company. Typically, for first three years only, customers have to pay allocation charges.

d. Do you have rider benefits in ULIP?


e. Can I switch over my funds when the market condition is not good?

Yes. The option of switching over your funds is available.

f. What are mortality charges?

Since ULIPs are investment cum insurance plans, there is a small portion of the unit allotted to insurance plan every year.

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