Life insurance policy provides you assurance that your family will get financial security and support even when you are not around. This is the best way where the insured person can save his family from financial crisis at the time of any mishappening or after death. With a population of over one Billion, only 35 million people in India are covered with life assurance policies. There are so many reasons behind this low penetration of insurance. Undoubtedly, ignorance about insurance, lack of knowledge about facilities and cost efficiency of insurance - are some of the reasons.
Life Insurance Basics
It is an agreement between two parties i.e. insured and insurer where in insurer agrees to indemnify insured in event of any contingency leading to death and injuries.
Types of Life Insurance
There are various types of life covers available to an individual depending upon the sole motive of insurance in order to meet contingencies. Below are types of life cover options available to an individual:
· Term Insurance
Term insurance plans provide insurance to an individual for a fixed tenure. It is the pure and cheapest form of insurance for an individual. This type of policy is suitable for people who are unable to pay high insurance in order to buy endowment policies.
· Whole Life Insurance
Whole life policies are totally opposite to term life plans. This insurance policy covers risk to an individual for their whole life and generally no pay backs are provided under these types of policies.
· Endowment Policy
These are also referred as the traditional policies. Endowment policies cover the risks of an individual for a specific period of time as per the opted policy and it also pay backs sum assured and promised bonuses at time of maturity as well.
· Money Back Policy
Money back insurance policy is a type of life cover under which money is paid to an individual at different stages of life yet covering their risk for a specific period of time.
· Unit Linked Insurance Policy
Unit linked insurance plans are the modern form of insurance. In addition to insurance cover provided by the provider, money is also invested in various avenues therefore providing opportunity to derive good returns as well. So, it serves as an insurance policy and investment plan.
· Retirement Plans
These policies are specially meant to provide steady income to an individual after their retirement. These kinds of policies enable a person to be independent maintaining good lifestyle.
· Child Insurance Policy
These types of policies are meant especially for children. The basic motive of these policies is to provide financial assistance to a child at various stages of their education and thus making their bright future.
Term Life Protection Plan
Term life protects an individual from any contingency for a specific tenure and it is not hard on your pockets as well as premiums are very low. They offer maximum coverage and secure your family's future. They don't pay you anything back at the time of maturity if the person survives for the tenure of the whole policy which is the demerit linked with term plans.
Term Insurance Investment Plan
Term insurance investment plans serves dual person for an individual. It provides you life cover and helps your money to grow as it can be invested in various investment avenues. Investment avenues range from high risk to low risk depending upon your investment allocation.
Life Insurance Coverage
It is the sum assured to an individual in the event of any contingency. This coverage depends upon many factors like age of the insured, coverage of the policy and the policy opted by an individual. The risk group also decides the life coverage of an insurance policy.
There are various terms used in an insurance contract. Below are some of the terms used:
· Indisputability Clause:
An insurance provider can challenge the validity of your insurance claim if genuine and proper information is not provided to them. They have the right to cancel your insurance policy and return your premiums.
· Suicide Provision:
This provision is the clause under which insurance company will not settle any claim if insured commits a suicide or even make an attempt to suicide.
· Reinstatement clause:
The reinstatement clause becomes useful when your policy lapses in the event of non-payment of the premiums. It states that policy can be revived again after paying outstanding premiums along with late fees or interest but an insured must declare and prove themselves fit in order to be eligible for this provision.
· Settlement Options:
This clause states that you will collect your settlements as per the options provided by the insurance company.
· Excluded Risks:
There can be few exclusions depending upon the policy like covers are not provided under situations like war and aviation accident.
· Grace Period:A grace period is provided to an individual in the event when an individual is not able to pay premiums within stipulated time. Generally time period for payment of the premium is extended.
Life Insurance Claims
These claims are differentiated into two different forms as below:
· Death claims:
Death claims are made by nominees of the individual in the event of death of the insured. There are few formalities to be provided to the insurance company like policyholder's death certificate, original policy contract, a duly filled claim form and proof of identity of the beneficiary.
· Maturity claims:
Maturity claims are made by the individual when policy term gets completed and to avail this benefit insured has to furbish original policy bond and duly filled maturity claim form.
One of the key factors while buying insurance is tax. In India, tax rebate is provided to an individual for the sum invested in insurance policies. The amount invested in life cover is eligible for deduction of the amount from taxable income.