Life Insurance is a binding contract between the Life Insurance company and the party to which the policy has been issued by the company – in which the company agrees to pay a fixed amount (known as Sum Assured) to the party in case of his death. In return the party would have to pay a fixed amount per annum or per month (depending upon the mode of payment) as a Premium amount.
How is Life Insurance Policy issued?
A user would get to know about purchasing a life insurance plan either from offline or online channels. Below mentioned is a generic process how finally the policy gets issued:
- User identifies the need of buying a life insurance policy
- User compares the shortlisted plans as per his requirement and starts paying the premium amount.
- Once the payment is done, the questions asked from the company to the user – related to health, hobbies and general life style of the user are evaluated by the “Under writing” team in any company.
- If the Underwriting team feels all the information provided by the user is correct, then only the policy gets issued.
The process may take 3-30 days depending upon the time but yes – one should definitely have a life insurance policy
Top Reasons to Buy a Life Insurance Plan
- Saving in Long-Term: Life insurance policies are beneficial for generating savings along with investing to construct wealth. To adequately reach your financial requirements by the end of the policy period, the life insurance plans come with a long term perspective which prevail long term savings so that the corpus collected by the end is sufficient enough for your family and dependents.
- Life Stage Planning: To plan various stages of life of a policyholder, the Life insurance policies assist its insured by providing a financial support for the same. There are different kinds of life insurance plans and each plan can be purchased for planning a particular financial goal. For example, pension plans assist in securing your retirement corpus and child plans help greatly for securing your child’s future.
- Life Coverage: To provide efficient coverage to the insured individual is the primary benefit of having a life insurance policy. The insurance provider is bound to provide the nominee/beneficiary of the policyholder with a life cover in a situation of an unfortunate event like death. Hence, life insurance policy is obtained to secure the policyholder and their family from financial instability during such unfortunate happenings.
- Financial Safeguard: In a situation of an untimely event, theLife insurance policies protect the family/dependents of the policyholder from a financial strain. Any loans pay off, expenses of a child’s education, etc. can be made using the perks of the policy.
- Waiver of Premium: On occurrence of few specified events, many life insurance policies offer the policyholder with an advantage of waiver of premium. For example, in case of irreversible disability of the insured, remaining premium amount for the rest of time period is waived off. Identically, if the parent policyholder dies under child plans, there is a waiver of premium benefit wherein premiums are sacrificed by the insurance company.
- Benefit of Riders: To enhance the coverage according to your needs and requirements,life insurance policies offer additional riders.Critical illness rider, permanent disability rider, personal accident rider, etc. are some of the common riders.
- Benefit of Loan against policies: Loan against insurance companies themselves is provided under Life Insurance Policies. This means that when you are in urgent need of funds, the company permits to avail a loan against your life insurance policy after a specified period. Additionally, to avail a secured loan, your life insurance plans also renders advantages of collateral which can successfully be mortgaged.
- Online Availability: These days, you can opt to buy life insurance policies from the comfort of your own home or office without having to visit the company’s branches or meeting an agent as the plans are also available online on the insurance company’s website which allows you to buy the policy with ease.
- Life Insurance Policy is not always expensive: When you plan to purchase a higher sum assured policy, few of the Life Insurance policies like traditional plans- endowment plan or money-back policy might turn slightly expensive. Although, is case of a term plan, affordable premium payment rates and offered along with granting a high coverage to its policyholders.
- Bonus: Bonus is the added benefit which grants an individual to enhance the sum assured receivable on the policy’s maturity or after death of its insured. Such benefits are offered under many traditional life insurance policies, like endowment and money back plans.
Life Insurance Discounts
An individual can also opt to buy a life insurance policy online through a company’s website, as this service is offered by many insurance providers, nowadays.
When you purchase a policy online, the administrative costs of the company is lowered. Additionally, if the policy is purchased directly from the insurance company, the commission payable to the middleman also gets banished.
Consequently, the premium payable for online plans becomes low. Life insurance companies, henceforth, grant you with a premium discount if you opt to buy the policy over the web. A reduction of 5% to 10% can be availed for acquiring life insurance plans online.
Hence, buying a plan through a company’s website provides a cut-price of the required premium payments along with the process being simple and uncomplicated.
Life Insurance Tax Benefits
Tax benefits which can be availed upon buying life insurance plans are listed below:
- Section 80C of Income Tax Act: An individual can avail a tax rebate if the premium paid by the policyholder under a life insurance policy is up to the maximum limit of Rs. 1, 50,000, under Section 80C of the Income Tax Act. Additionally,premiums up to 10% of the sum assured would be permitted as a deduction. If the premium exceeds 10% of the sum assured, the remaining would be taxable.
- Section 80CCC of Income Tax Act: An individual can avail tax exemption for the premiums paid for buying annuity plans, under section 80CCC. The limitation is up to Rs.1.5 lakhs and involves the deductions available under Section 80C.
- Section 10(10A) of the Income Tax Act: The commuted amount would be a tax-free income in your handsif you buy a deferred annuity plan and commute a part of the corpus on maturity under Section 10(10A)of the Income Tax Act. Commutation means withdrawal from the sum corpus and such drawings are allowed for up to 1/3rd of the total corpus. The total amount withdrawn is a tax-free income under Section 10 (10A)
Section 10(10D) of Income Tax Act: The assured sum and any rewards (i.e. the proceeds of the policy) provided on policy’s maturity or after demise of the insured in entirely tax-free under Section 10(10D). Additionally, if you give-up the policy, the surrender value would be a tax-free income. Partial withdrawals made under ULIPs and survival benefits payable constituted under money back plans are also treated to tax-free incomes under this section.
Moreover, there is no exceeding limit on the rebate that you can claim. The whole sum acquired by you would be a tax-free benefit.
Is Buying Insurance online safe?
Nowadays, Insurance companies and Insurance aggregators are offering policies online, which are being sold on a rapid pace.
Hence, purchasing an insurance online is entirely a safe process as companies implement encrypted payment methods which obviate cyber-crime.
However, if you are bothered regarding the safety of online transactions, you should always opt for reputed websites to buy the policy from.
You can check if the website is prefixed by ‘https://’ where ‘s’ denotes that the website is secured. If you choose verified and renowned websites, there would be no scope for online frauds and you can hence purchase your insurance safely.
Policystar is a secured online portal which offers information regarding some of the topmost policies from various leading life insurance companies.
You can visit www.policystar.com to research about different policies while planning to buy one.
Can I change the policy duration after the issuance of the policy?
It is not permitted to alter the policy duration after the allotment of your life insurance policy.
This is so because the premium payments of a policy are evaluated based on a policy’s duration selected by the policyholder.
In such a case, altering the tenure would directly impact its premium rates and is, consequently, not permitted.
Although, you can cancel your existing policy and purchase a different plan with a suitable tenure as per your new requirements in case if your policy is in the free-look period.
What are the charges to revive lapsed life insurance policy?
It is totally based on your insurance provider regarding the charges they would impose for the revival of a lapsed policy.
The insurance company might press a charge for restoration and also an interest on the outstanding premium.
Depending upon the policies of the insurance company, the charge may vary from INR 50 to INR 500.
Who can be a nominee in life insurance?
Under a life insurance policy, it is permitted to appoint an individual or an entity as a nominee.
Additionally, no blood relation is required for appointing a nominee. Henceforth, in a life insurance policy, you can nominate your family members, friends, partner or even a bank or charitable organisation.
How life insurance premiums are calculated?
While evaluating the premium on a life insurance policy, multiple keypoints are kept in consideration to acquire the most appropriate amount.
These points involve age of the insured, medical history, family history, sex, occupation, lifestyle habits, physical build, sum assured chosen, policy term, premium payment term and frequency, riders selected, if any, etc.