Life Insurance

A life insurance policy is the best financial protection plan as it offers several benefits.

Financial security: If you purchase a sizeable life cover, it will be paid as a lump sum death benefit to your dependants, in case of your accidental death. This can help them live comfortably, especially if they do not have a source of income and have young children or aging parents.

Wealth creation: Some life insurance plans offer the double benefit of investment plus insurance. The insurer invests a portion of the premium payments in equity funds to grow your funds, while the rest goes towards life cover.

Protection for every life stage: Whether it is financial security for your children's future, a steady source of income post the breadwinner's death, retirement planning or simply long-term savings, there is a life insurance policy for every need.

Tax savings: Section 80C of the Income Tax Act makes the premium payments tax-free, which reduces your taxable income. Furthermore, Section 10(10D) ensures that the pay-outs also remain tax-free. These tax laws make life insurance a worthy investment.

Retirement planning: Your work life may end, but your living expenses will still continue. A retirement life insurance policy offers coverage plus a steady source of income which can fund daily expenses, set up a small business or be reinvested in other financial instruments.

Safe investment: Financial products that offer market linked returns are subject to market volatility, which makes them risky. Life insurance, however, offers you assured benefits in exchange for premium payments.

Loan options: In case of an unexpected financial crisis, life insurance lets you borrow from the sum assured, depending on the policy terms and conditions.

Riders: Riders are additional benefits that you can purchase to make your life insurance policy stronger. Riders protect you from uncertainties such as critical illness, accidental death, or total permanent/partial disability that can cause loss of income.

A life insurance company in India offers many options and you will find a life insurance plan that best meets your needs

1. Term insurance: Term insurance is an affordable pure risk coverage life insurance plan that protects your future earning power and your family's financial security in the event of an accident, illness or death by natural causes. If you die before the policy term ends, your beneficiaries receive the sum assured as a death benefit.
2. Endowment plan: Endowment offers the double benefit of life insurance and savings, along with a certain level of guaranteed returns. It is ideal for building a corpus for future needs. If the insured survives the policy term, the maturity amount is paid. If not, the beneficiary receives the sum assured as a death benefit.
3. ULIP:ULIP (Unit Linked Insurance Plan) is a form of life insurance that provides life cover, while growing your wealth through market-linked investments. ULIP offers customized options that can evolve to your needs.
4. Retirement Plan: This gives life cover and helps build a corpus to fund your retirement expenses, which makes it a good life insurance for senior citizens.
5. Annuity Plan: A type of retirement plan, in which the insurer takes a lump sum premium, invests it, and pays you back higher returns as a regular income.
6. Child Plan: This life insurance cum investment plan helps build a corpus for your child's future requirements. In case of your death, the child receives the sum assured as a lump sum or in installments.

While life insurance is an absolute must to safeguard your family's financial security, it is important to consider these factors when purchasing a policy.

1. Take a cover you can afford: Life insurance cover is proportionate to premium paid - the higher the premium, the more the cover. Before arriving at this figure, consider all other household expenses and debts. Ensure that you can afford the premium payment for the entre policy term as a missed payment can affect your life cover.
2. Policy tenure: The sum assured should be sufficient to finance your family's future expenses, such as children's education, healthcare for aging parents, as well as provide a steady source of income for daily needs. Choosing life insurance with the maximum tenure will ensure long term financial security.
3. Compare plans: Different insurance companies offer different life insurance products. Compare different plans based upon their offerings, benefits, claim settlement ratio, life insurance claim settlement process and ease of purchase and renewal. Choose a reputed company and beware of spurious ones online.
4. Be honest with your facts: If you suffer from any pre-existing medical condition or life-threatening lifestyle habits, disclose it during policy purchase as every insurance company in India rejects a life insurance claim settlement that is fraudulent.
5. Claim settlement: Check the claims payment process and settlement ratio, to prevent your family's emotional and financial stress during the life insurance claim. A consistently good ratio is a good indicator of the life insurance company's willingness to pay.

The life insurance premium amount is determined basis the following:

1. Age: The best life insurance policy is taken when you are young as you are healthy and expected to live longer. This makes you less of a liability to the insurer and you benefit from a lower premium payment.
2. Gender: Scientific and statistical data prove that women outlive men by approximately 5 years. This increases their life insurance policy tenure, giving them the benefit of lower premiums.
3. Medical history: Any prior illness or family history of certain genetic medical conditions could warrant a higher premium payment. To get the best life insurance policy, the insurer may subject you to a medical test.
4. Lifestyle choices: A stressful lifestyle that includes alcohol and tobacco can impact your life insurance premium.