Life Insurance Plans
A life insurance is a formidable financial cushion necessary for all. While it offers security to a family with a single breadwinner, it also helps individuals secure their life, especially post retirement. This is because a life insurance can be claimed by the insured even after it reaches maturity. It, therefore, promises a financially secured future, irrespective of anyone’s marital status, job or business stability.
What is Life Insurance?
Life Insurance is an assurance of financial cover to a beneficiary upon the death of the insurance holder or after a maturity period. This arrangement is entered through a legally binding contract between an insurance policy seller or provider and an insurance policyholder. The recipient appoints a beneficiary who will receive an insured financial aid after the death of the insurance holder. The insured amount is compiled over time by the policyholder through recurring monthly premium payments.
Types of Life Insurance
Even though life insurance, in general, is a straightforward financial investment with assured returns over maturity or after the death of the insured, there are various kinds of life insurances offered to the residents of India. These variations have their own targeted customers who may benefit from them uniquely. One has to carefully consider these types before choosing a plan that best suits them.
Here are the types of life insurances offered in India.
Term Life Insurance
Term life insurance is a fairly basic and common insurance plan where customers have the freedom to choose a term for their insurance, such as 10 years, 20 years, etc. This kind has a relatively cheaper premium due to its nature being a pure life cover. There are usually not any returns under normal conditions or expiration of the term period. The benefits are only provided in case of death or illness. The financial benefit is provided to the beneficiary of the insurance holder after his/her death during the term.
Whole Life Insurance
A whole life insurance policy offers a financial cover for the entire lifetime of the policyholder. It is only after the demise of the policyholder that the beneficiary receives the premium amount. There are several benefits available with whole life insurance, such as collateral benefits for availing loans, dividend paybacks at regular intervals, etc.
A two-way beneficial life insurance plan is just as much an insurance policy as it is an investment with returns. The endowment plan life insurance policyholder will have the benefit of receiving the full amount upon the expiration date of the policy along with the profits or bonus relative to the number of years the insured survived. Many see this as an investment opportunity that also provides a life cover.
With a money-back life insurance policy, customers are eligible to receive a sum of money at regular intervals along with the full payment at the expiration of the term or after the death of the insurance holder. Being an extremely rewarding policy, Money-Back Life Insurance Policy is one of the most expensive policies to purchase. It is worth considering given its returns are assured in the form of survival benefits, death benefits and term-expiration benefits.
Unit Linked Insurance Plan (ULIP)
A hybrid of life insurance and investing, Unit Linked Insurance Plan (ULIP) is a unique and popular life insurance plan to look out for. The special features of ULIP include allocation of funds towards the policyholders' life insurance and rest invested in the various Investment instruments such as mutual funds, equities, etc. There are benefits of ULIP for a policyholder in terms of cash-flow allocation in relation to market behavior. The percentage of funds allocated for investments is generally handled by an expert fund manager.
Top 5 Life Insurance Companies in India
It is almost prudent to have our lives insured and financially covered so that our loved ones do not have to face money-based needs after our lifetime. This demand equally needs to be matched with entities supporting the cause.
In India, there are 58 officially listed insurance companies along with 34 general insurance companies. These companies provide a great deal of assistance in helping people secure their lives for their loved ones.
Given below is a list of the top 10 life insurance companies in India that have impacted the insurance industry gravely.
1) Life Insurance Corporation
LIC or Life Insurance Corporation of India is a government-approved statutory entity that came into effect by the LIC Act, 1956. It is one of the major insurance policy providers in India. Since its establishment in 1956, LIC has generated a revenue of 74 billion USD. The corporation is parent to subsidiaries like LIC Housing Finance, LIC International Ltd., LIC Cards Services Ltd., LIC Mutual Funds, etc.
Life Insurance Corporation has various insurance products. This includes endowment plans such as LIC’s Bima Jyoti, LIC’s Bachat Plus, LIC’s New Jeevan Anand, etc.; Whole Life plans namely Jeevan Umang; Money-Back Plans such as LIC’s Dhan Rekha, LICs Bima Bachat, LICs Jeevan Tarun, etc.
2) ICICI Prudential Life Insurance
Another major company in the insurance industry that has managed to raise a revenue of US$350 million is ICICI Prudential Life Insurance. It offers an array of life insurance products for people with various exigencies of life. The products enlisted with the ICICI Prudential Life Insurance company are term insurance plans, health insurance plans, unit-linked insurance plans, traditional savings/money back plans, retirement plans, riders plans, group plans and rural plans. ICICI Prudential also claims to provide complete protection and savings benefits.
3) SBI Life Insurance
Approved as one of the best insurance companies in India by the Insurance Regulatory and Development Authority of India (IRDAI), SBI Life Insurance operates with its high standard policies and service. SBI Life Insurance offers products for both individual life insurance as well as group life insurance. Some of the popular life insurance plans include Arogya Shield, SBI Life eShield Next, SBI Life Saral Bima Jeevan, etc.
4) Max Life Insurance Company
This large non-banking Insurance company was founded in the year 2000 and is well funded by an Indian multi-venture company and a Japanese Insurance Company. Max Life Insurance Company, since its establishment, managed to raise a net income of more than INR 400 crore. The company offers various term plan products to its customers along with excellent customer service. Some of the main features of their Term Insurance Plans include a cheaper minimum purchase amount, guaranteed terminal illness coverage, tax exemption, etc. Customers can consider the Smart Secure Plus Plan, Term Plans With Return of Premium, Saral Jeevan Bima or the Critical Illness Plan.
5) HDFC Life Insurance Company
Another crucial private insurance company, namely, HDFC Life Insurance Company is a joint venture of HDFC Ltd. and Standard Life Aberdeen, which was also founded in the year 2000. HDFC Life Insurance has established a strong digital base allowing its customers to easily access its products and services. Moreover, with several agencies supporting the company's operations, HDFC Life Insurance manages to offer its customers a holistic service. Some of the main products offered by the company include HDFC Life Click to Protect Life, HDFC Life Saral Jeevan Bima, Quick Protect Plan, HDFC Group Poorna Suraksha, HDFC Life Group Credit Protection Plus, etc.
Best Life Insurance Plans in India 2022
There are various companies offering high-end insurance products that serve the public needs in diverse ways. These products are often modified with current prices and policies with respect to both market behaviour and industry competition. Here are some of the best-fared life insurance plans in India in 2022:
LIC’s Tech Term Plan
Life Insurance Corporation (LIC) introduced the plan in the year 2019 and assures the customers of a pure protection policy. This policy is a non-linked non-profit policy that aims to provide financial cover for the benefactor at the time of the insurance holder’s demise.
HDFC Click 2 Protect Plus
HDFC Click 2 Protect Plus is another Term-Life-Insurance Policy that has fared well among the public. HDFC Life Insurance introduced this plan with the aim to provide an extensive life cover at a lower cost along with complete protection for the customer and his/her loved ones. The policy is modifiable in terms of cover options, such as life option, extra-life option, income option, income plus option, etc.
Max Life Smart Secure Plus Plans
Max Life Smart Secure Plus Plans offer great financial protection along with repayment flexibility. The minimum age to enter into this policy is 18 and a maximum of 65 years. The premium can be paid till the age of 44-60 years. There will be an assurance of up to INR 20 Lakhs in case of a base death benefit.
How Much Life Insurance to Buy?
One may not think about it every day every now and then, but death is very well an aspect of life that is inevitable. Indeed there are many families that are dependent on a sole breadwinner for the family. In situations like these, it is highly advisable to consider a financial cushion for the dependents in times of crisis. Life insurance is capable of providing families with support for debt payback, managing day-to-day expenses, funding funerals, etc.
But the real question is “How much life insurance to buy?”. To answer this question simply, one would say that your life insurance cover should be as much as your life goals and needs are concerned. Consider the following prerogatives to get an idea of how much life insurance you will need to buy.
- Firstly, assess the situation your family is in.
- Are there too many members dependent on you? This will help you answer how much cover you should go for.
- Other than that, consider the health conditions of your members.
- Track if you have any sorts of debts.
Analysing all these questions will bring down to a general idea of how much life insurance you would require. In general, it is recommended that one should take an insurance cover 10 times the annual income with the addition of funds depending on the number of children. This thumb rule is a great way to replace your income in case of any unexpected event.
What Factors Affect Your Life Insurance Premiums and Costs?
There are several factors that affect your life insurance premiums and costs. These are as follows:
A major factor affecting the life insurance premium and cost is the age of the person. It is a logical understanding that the younger you are, the more likely you are able to cover up the complete cover payment with a lower premium cost. A young working professional, thus, would be incurring a lower monthly or annual premium as compared to an older counterpart.
As per official data and statistics, it has been established that women tend to live longer compared to men. That definitely means that women are able to stretch out their premiums in the long run than men.
Another major factor affecting the life insurance premium cost is the health history of an individual. This factor goes hand in hand with the age factor as the probability of a person with multiple morbidities facing an untimely demise is higher than a healthy individual. Any insurance company will seek out an extensive health report of the person before making any final decisions.
Some of the factors that can be addressed under health would be family health background and whether smoking or non-smoking.
Field of Work
This factor is essential for an insurance company to compute how much insurance premium to charge. This is important because there are many fields with high chances of fatality. The risk factor associated with one’s job is indeed a major factor for premium cost consideration.
Life Insurance Buying Guide
Just like any other investment that will cost you recurring charges or payments, buying an insurance policy will also incur monthly/regular premium payments. The insurance policy that you will buy will assess and generate a payment routine based on your profile and history. This payment may or may not become a major recurring expense depending on your income. But it is highly recommended to thoroughly assess the policies you will be purchasing and the company you will be purchasing them from.
When considering a life insurance policy, review the following factors.
- Ascertain your needs: Make a review of your needs as the gross necessities will depend on the number of family members involved, health conditions, etc. Once you are aware of your goals the following steps will be relatively smoother.
- Scout top organisations that provide life insurance policies: It is important to find an institution that is established and trusted. This will ensure the highest quality of service. Decide if you would like to buy a policy from government institutions, such as LIC or SBI.
- Decide the policy type that's best for you: There are a few varieties of policy types that insurance companies offer. Assess the types based on your needs to decide what kind of insurance to go for and compare their prices to grab the best deal.
- Go for the one you can afford: After comparing, read about the terms and policies of that particular company and decide whether it suits you. Else move to the next best. Make sure that you consider a policy that you can afford to pay for. It should not be a burden on you.
- Company history matters: You are leaving your fortune with a company in trust that they will repay that in the future. Companies always check your eligibility and creditworthiness. But that should not be a one-way deed. You should make sure the insurance company you are investing in maintains the highest of your standards.
Benefits of a Life Insurance Policy
With an insurance policy, you can actually leave out much of your finance-related stress to the insurance company. A policy will give you an opportunity to leave your family members with much-needed future financial security. With many types of life insurance policies, it is possible to find something that can also become an investment. Here are some of the major benefits of owning a life insurance policy.
Financial Cover in case of Death
Insurance can help your family and loved ones with financial cover during an untimely death. This can take the pressure off the family in various ways. Insurances help cover funerals, deal with outstanding debts, etc.
Profitable Return on Investments
When you purchase an insurance policy, you are setting aside a small part of your income over a regular period of time. This accumulated fund is returned to you at the end of the term of the policy. There are many insurance types that offer survival bonuses and returns on investment along with the principal.
Insurance policies can help you claim your tax returns as most of the policy premiums are tax exempted. The Income Tax Act has given tax benefits on several types of investments for salaried employees.
A life insurance policy can be considered as collateral for availing of a bank loan. The loan can be issued against the policy amount. It is to be noted that the loan amount will depend on the premium amount as only a certain percentage of it will be assured. This can be extremely handy in troubled times.
Documents Requirements for Buying a Life Insurance Policy
Insurance policies are issued after the submission of complete valid documents and a post-background-check process. Identification and residential proofs are two of the mandated documents asked for verification. The complete list of documents required for buying a life insurance policy are as follows:
|Application form||Complete medical checkup report|
|Identification proof||Income proof|
|Residence proof||Bank statement|
|Age proof||PAN details|
|Photograph of the applicant|
How to Claim Life Insurance?
When an insurance holder dies or the insurance policy reaches maturity, it is advised to reach out to the insurance company as soon as possible. In case of death, the benefactor or any relative can claim the insurance money. However, in the case of the expiration of the term, it is the company that usually reaches out first. The company can send information regarding the same a couple of months in advance.
To make an insurance money claim in case of a death, the IRDAI (Insurance Regulatory and Development Authority of India) has made the following suggestions:
- Inform the company as soon as possible.
- Take assistance from the insurance company agent.
- The benefactor needs to fill a claim form.
- Provide the company with documents, such as a death certificate, policy letter, proof of relation, deeds of assignments and a form with the information for discharge execution.
It is possible that the company might ask for medical certificates of the deceased for inquiry.
How to Save Tax with a Life Insurance Policy?
Investing in life insurance can prove to be a major tax saver as according to Section 80 C of the Income Tax Act 1961, you can reclaim your tax deductions for the payments made against tax-saving investment tools, such as an insurance premium, mutual funds, PPFs, etc. It states that you can save up to INR1.5 Lakhs by showing your recurring payment bank statements while filing your tax returns.
Frequently Asked Questions - FAQs
Ques: Who needs life insurance?
Ans: Life insurance is an extremely important financial tool for anyone who is the sole breadwinner of their family. A father, a mother, an entrepreneur, and even a young person who started working but has a student loan can consider life insurance. The main purpose of life insurance is to provide a financial cushion for your family in case of your demise.
Ques: Is life insurance necessary if I am single?
Ans: When it comes to considering whether or not you need life insurance, marital status isn’t something you should regard. The fact that there could be dependent parents, student loans, mortgages, etc. can also become a reason to consider an insurance policy.
Ques: What is life insurance and how does it function?
Ans: Insurance is an agreement between a company and an individual where the individual pays the company a regular payment in return for an assurance of the complete amount repayment after a death or expiration of the maturity period. The individual has to nominate a receiver for the insurance amount.
Ques: What are the three main types of life insurance?
Ans: Generally, the three main types of life insurance are the traditional whole life insurance where the insurance settlement is done after the death of the insured, hybrid insurance with the dual purpose of investing and insurance, and term-based insurance which are insurance bought for a specific period.
Ques: What are five things not covered by life insurance?
Ans: Out of the many possibilities, there are some red flags when it comes to insurance claims. These are death by suicide, death by murder (if the holder is involved in any criminal activities), death by drug overdose or under the influence of alcohol consumption, death due to pregnancy complications and death due to a natural calamity.
Ques: What type of life insurance is best for a 50-year-old?
Ans: At the age of 50, the best insurance policy option would be to get a fixed-term policy of 10 or 20 years. This will be cost-efficient and financially secure in case of a death. Also, funeral and post-mortem formalities will also be taken care of with the policy.
Ques: What happens if someone passes away shortly after getting life insurance?
Ans: If someone dies shortly after getting life insurance, the claim process will remain similar to any other claim proceedings. The benefactor or any relative will be responsible for communicating the death report to the company. Once the first premium is paid, the insurance is assured. Fill out the claim form and submit the required documents with the company.
Ques: At what age should life insurance be stopped?
Ans: Anyone with a whole life insurance policy will be eligible for an insurance cover till 100 years of age. One can make the premium principal amount till it is completely paid. However, for taking a new insurance policy, the age limit is generally accepted to be around 65 years. At the age of 65, one can opt for a term policy or even a whole life policy.
Ques: How long after getting life insurance can you claim it?
Ans: There will be a waiting period for claiming life insurance. A policyholder can make his insurance claim depending on the period acceptable to the issuer. It may range somewhere between 30 days to 180 days.
Ques: Is it safe to buy life insurance online?
Ans: It is safe to buy a life insurance policy online. With the digitization of insurance companies, many prefer buying policies online. Companies help out new users by providing an agent to walk them through the process of purchasing. The online process is much faster and hassle-free with easy document upload and payment processes.
Ques: Can I get life insurance for my parents?
Ans: Insurance for parents can be purchased with their consent and supporting documents. However, factors such as age and health conditions will massively affect the premium amount. There are a few insurance types that will suit this situation like a term policy, whole life policy, and retirement plans.
Ques: Do life insurance premiums increase with age?
Ans: Life insurance premiums increase with age due to the fact that the life expectancy of humans is more or less the same. So, the older one gets the costlier the premium will be. For example, a person in his/her 20s may get a premium lesser than a person in his/her 40s.