Usually a family comprises of a person who works and earns money for the family and also people who are dependent on him/her. They may not have any means of earning money and it is the responsibility of the breadwinner to secure his family in the case of any unforeseen tragedy or his untimely demise. Life insurance comes as a respite to provide maximum protection to them. There are various life insurance products available in the market and term plan is one of them. Term plans are also called as term assurance and they provide coverage of life only for a short and specific duration till the premium amount is paid. If the insured dies due to any reason during this tenure, the death coverage is offered to the beneficiaries.

Most of the term plans have their premium rates fixed and are based on the age of the insured and health factors as well as other factors like gender, vices like smoking or alcohol. If the tenure of the policy completes, then it lapses and no benefits are provided to the insured. It can also be bought online which can help in saving time and money on premiums.

Why choose a Term Plan?

Term plans usually give maximum coverage for the lowest premium amount. Term plans can be used effectively if their benefits are understood well and they are used based on the requirement and circumstances. Some significant ways of using term plans sensibly are:

• Term plans should be chosen in such a way that the term cover can be increased, decreased or stopped based on the situation. It is recommended to opt for term plans without return of premium as that is the most economical option. It would be ideal to buy new term plans with different critical stages of life like marriage, birth of a child so that family members are included in the coverage. It can be bought for a maximum duration of 30 years or till the age of 65. It is better to opt for term plans when still young as the premium is much lower then. However, the duration and coverage should be reviewed often with the income increasing with age and experience and also accumulation of funds and assets. It can be further revised with the build up of assets and lesser liabilities like children working and settling.

• The term plan can also be used to take care of the home loan in case there is sudden death of the insured. Usually the home loan repayment is done by the insured and it lasts for most of the working life. In case of a death, then the family members will have to take care of the repayment of the home loan or lose possession of the home. In such a case, term plans help as they are of low-cost and a high coverage and can take care of the rest of the home loan.

• Term plans can also be used for taking care of shorter-term loans. Short-term term plans can be used effectively to manage loans like car loans or purchase of business equipment. The term plans can be stopped as soon as the tenure of the short-term loans gets over.

Buying a Term Plan

A prospective policyholder can buy a term plan from insurance companies, agents or even online. A comparative analysis should be done before choosing one which is most suitable for the policyholder based on his age, gender and other related factors. Most of the insurance companies provide information on their company websites. Information can also be collected from authorized agents.

A comparative chart of products with their premium amount is given below. It is specific for term plans of Rs. 50L at the age of 25 years.

Hence, term plan is suitable for those who do not want to merge their investment objectives with risk objectives. If the policyholder is fine during the tenure of the policy, no money is given to him or his family members. However, in case of a death, the family members can get the sum assured. Though the premium is quite low for high coverage, it can be increased or decreased at the end of each term. It covers not only the policy holder but his family members as well in case of any unforeseen tragedy.

When the insurance advisor approaches to sell a policy or plan, his persuasive tone might drown your doubts that are critical to wise investment. Only features that provide a feel good factor are disclosed to the customer and the aspects that may discourage the customer are conveniently hidden by the agent. A careful inspection of the fine print in the policy document will reveal many such loop holes that may actually prevent you from getting all the promised benefits of the policy. It is a good idea to get all your doubts clarified right from the beginning to avoid unpleasant surprises later. One may also approach the branch manager or the training manager of the insurance company in order to get all the details simplified whenever there is any confusion regarding the terms and conditions or the features of the plan.

Hidden Charges

Depending on the insurance variant and nature of the plan the fee and charges will vary. If you are opting for an insurance plan that combines investment and insurance your agent might casually overlook any mention of the allocation fees and administrative charges that the insurance company is going to take from the amount deposited. The first aspect through which the buyer will lose money when taking an insurance policy is the allocation fees, which comprises of the administrative charges and the risk premium charges. This implies that when you buy a policy there will be a considerable amount deducted from the money paid towards allocation fees and the remaining will only be used to buy units for your insurance account. The allocation fee is typically highest in the first year and thereafter reduces proportionally. Thus in order to recover the basic amount that has been invested the investor will have to wait till the NAV of the remaining amount grows to make up for this amount.

Lock in Period

The lock in period is another aspect that the advisor is usually shy to explain. This is the mandatory period for which the money must stay invested with that company in order to derive benefits. In case the investor wishes to withdraw during this period there are likely to be sever penalties which will significantly reduce the net amount payable to the investor. As high as 4 % of the amount paid may be lost in case withdrawing before completion of the minimum prescribed lock in period. Thus while making the decision to buy a policy one must look at the possibilities of any requirements for withdrawing in between and then put in the money.

Surrender Charges

The surrender charges are never mentioned to the buyer at the time of purchase. The agent will usually promise that the entire NAV of the plan will be paid out to the customer incase the policy is surrendered before its maturity. However, this is not the case in majority of instances. All companies do levy a fixed surrender charge if the policy does not reach maturity. This charge can be quite an amount considering the fact that the plan is held for 10 years or more and surrendered before maturity. Thus while buying a plan it would be wise to carefully consider the maturity period specified for that plan.

Terms and Conditions

There are several other factors that the terms and conditions of any insurance policy mention to which most buyers do not pay any heed at the time of purchase. However this slip up may actually render the policy invalid or make it extremely difficult to claim the full benefits at the time of requirement. It is in your own interest and the interest of the family members whom you are trying to protect, which warrants a careful study of all the clauses that is mentioned in the fine print of the policy before actually signing the deal.

A home is a place where dreams are built, memories are treasured and relationships are reinforced. Buying and owning a dream home is an aspiration all of us have and it is one of the most important financial decisions you will need to make. Most Indians who decide to buy a home opt for a home loan from one of the lenders. A home loan is one of the longest debts in your life, which requires a long term commitment. You owe money to the lender and this increases your risk profile. A home loan insurance plan mitigates this risk.

Need for home loan insurance-

Your home loan needs to be paid off to the lender in the form of Equated Monthly Instalments (EMI) over the tenure of the loan. This liability needs to be repaid to the lender, irrespective of whether you are alive or not. In case of your untimely death during the term of the loan, your family members will need to repay the loan. Home loan insurance ensures that the insurance company pays off the outstanding loan amount in the eventuality of your death, thus protecting your family members from the burden of repaying the home loan.

Working of home loan insurance-

The working of a home loan insurance is similar to a term life insurance policy. The differentiating factor between the two insurance policies is that in the case of a home loan insurance, the sum assured is not a fixed sum, but will be equal to the outstanding home loan amount. In other words, the insurance cover available under a home loan insurance policy keeps reducing with the payment of EMIs, which reduces the outstanding loan amount. In some cases (for example, the Home Safe Plus scheme of ICICI Bank), the cover available is on a flat basis instead of a reducing basis. In this case, a fixed amount is paid out to the beneficiary irrespective of the outstanding loan amount.

Eligibility criteria-

Home loan insurance eligibility criteria differ from one company to another. The minimum entry age is 18 years. The maximum age of the borrower while availing the home loan insurance is usually 50 years for most banks; some banks extend this upto 60 years. Some banks also stipulate the maximum age of the borrower on the expiry of the policy

Premium payment-

The amount of premium depends on:

• Age of the borrower- Premium increases with age of the borrower. Usually insurance companies insist on medical tests beyond 40 years. Below this, a simple declaration is sufficient.
• Amount and tenure of the home loan- Premium increases with the duration of the loan and amount. Even for the same insurance cover, a higher term will result in a higher premium.
• Borrower’s medical record- If the borrower is in good health, premium will be at regular rates. For example, if you have had a heart attack in the past, premium you will need to pay will be higher than a borrower with no past incidents.

Insurance companies generally insist on a one-time payment of premium. However, in most cases where insurance is taken from the company with which the home loan lender has a tie-up, the premium amount is bundled with the loan and included in the EMI amount. For example, if the home loan is for Rs. 20 lakhs and the insurance premium is for Rs. 2 lakhs, the lender pays the entire premium amount to the insurance company upfront. The new loan amount will now be Rs. 22 lakhs, which will be spread out as EMIs over the tenure. So in effect, you will be paying interest on the Rs.2 lakhs premium amount also.

Claim process-

Home loan insurance policies are taken in the name of the borrower of the home loan. In the case of death of the borrower, the onus lies on the family members to file and obtain the claim amount. If the claim is passed, the amount is directly paid to the lender or to the family member beneficiary. As in the case of all term insurance policies, in case the borrower is alive beyond the term of the policy, he does not get back the premium paid.

Choosing the right insurance policy-

It is not compulsory to take a home loan insurance policy from the lender/group company of the lender. Usually, home loan lenders tie-up with insurance companies and try to force borrowers to secure the policy from them. But as a borrower, you can secure a home loan insurance from any company. You can either avail the policy along with the home loan or at a later date.

Though it is not mandatory to have an insurance policy to cover your home loan, it is highly recommended to have one to reduce the burden on your family. It is always better to scout the market, do a thorough research and compare policies from different companies before deciding which insurance policy to purchase.

One of the most popular and important riders added to an insurance policy is the ‘Waiver of Premium’  rider. If this rider is a part of one’s insurance policy, it ensures that the premiums to be paid by the insured are waived in the event that the insured becomes ‘completely disabled’ or loses his source of revenue because of unemployment owing to an injury or sickness. In such a situation, even though the premiums are not paid by the insured, the policy does not lapse.

With the growing uncertainty of life, getting an insurance policy has become a must for almost every individual. When you take an insurance policy, you also tend to add ‘riders’  to the policy. Riders are the additional benefits that you may buy and add to your policy. They are options that allow you to enhance your insurance cover, qualitatively and quantitatively. Riders can be mixed and matched based on one’s preferences for a small additional cost.

One size does not fit all

A one size fits all approach does not apply to insurance policies. Therefore, the kind and number of riders added to an individual’s insurance policy depends on the many factors such as the individual’s health, future plans, purpose of the insurance etc.

One of the most popular and important riders added to an insurance policy is the ‘Waiver of Premium’  rider. If this rider is a part of one’s insurance policy, it ensures that the premiums to be paid by the insured are waived in the event that the insured becomes ‘completely disabled’ or loses his source of revenue because of unemployment owing to an injury or sickness. In such a situation, even though the premiums are not paid by the insured, the policy does not lapse.

What is a waiver of premium?

A waiver of premium is an extra option life insurance companies provide you with on top of your purchased life insurance policy at an additional cost. This offers protection and cover for your premiums if you should fall seriously ill or incur injuries that leave you impaired – in a situation where you cannot earn. In such an unfortunate event, the life insurance company will become responsible to pay the premiums which you were expected to pay.

The best part about this rider is that anyone who takes up the insurance policy can effectively add this rider to the policy. The amount of premium to be paid depends on the premium you pay on the base policy and on other riders. The higher the premium on the base policy, and the more the riders you add, the higher will be the premium you pay on this rider.

Is it worth it?

Many ask whether this rider is worth being latched on to the base policy. With the increasingly stressful lifestyle, hazardous traffic situations and a horde of other factors, addition of this rider to an insurance policy would be very helpful. This rider also ensures that in the event of death of the insured during the term of the policy, the policy does not lapse and remains in force even during the Auto Cover period. The Auto Cover Period is a term of two years during which full death cover continues even if the insured has not paid premiums – subject to at least two full years’ premiums having been paid.

One other feature of this rider that bears attention is the fact that the premium paid for this rider qualifies for tax deduction under section 80D of the Income Tax Act.

How is it useful?

This rider is especially useful in a child insurance policy as this primarily has been set up in place to provide money for your child in the hour of his or her need.

In the case of a child insurance policy, where you are ensuring your child receives a sum of money at a certain pre-defined age, this will ensure that the process is uninterrupted and premium payment is continued, so that your child receives the money at the pre-determined date.

Imagine the scenario if do not opt for this and end up in an unfortunate situation, where you are unable to pay your premium and the policy lapses. Then it would be no good to anybody, so to have this drawback plugged, its better to pay up the additional cost to ensure continuity in the premium payment.

The terms and conditions regarding what constitutes serious illenss or injury and conditions regarding the time frame when the premium payment starts by the insurer etc.  are defined by the insurance company and may vary from one company to another. Be sure to research on this thoroughly and understand the clauses and conditions of the insurance company until you choose an option offered by a company with which you are most comfortable with.

Usually, the premium paying term for the rider is throughout the benefit period but a few companies restrict the time frame to the policy owner attaining a particular age or for a maximum duration of 25 to 30 years.

Therefore, choose riders according to your need and budget. Sometimes its is the choice that we make that will help us through tough times.

Choosing the right kind of insurance cover not only determines the care that we receive should our health take a wrong turn, but it can be the wild card in your financial plan. There are many benefits of an insurance cover; however, topping the list of benefits is the financial support that a family gets in the event of the untimely death of the income provider. As getting the insurance cover is an important aspect of a sound financial future, choosing the right insurance cover is equally important.

With the increasingly uncertain times, what with terrorist attacks and tumultuous financial markets, getting an insurance cover for you and your family has become imperative. However, many of us do not take decisions because of it being such a big ball of wax.

Choosing the right kind of insurance cover not only determines the care that we receive should our health take a wrong turn, but it can be the wild card in your financial plan. There are many benefits of an insurance cover; however, topping the list of benefits is the financial support that a family gets in the event of the untimely death of the income provider. As getting the insurance cover is an important aspect of a sound financial future, choosing the right insurance cover is equally important.

First and foremost, choosing an insurance policy must be based on your current and projected income or simply put your current and projected ability to pay the insurance premiums, your medical state, your age, future financial plans etc.

Secondly, you also need to look at:

Cost-Benefit Ratio

The cost of the insurance cover depends upon many reasons, some mentioned above and other factors depending on what is covered in the cover or its riders. Thus, you have to keep a close eye on the cost of buying insurance and ensure that it justifies the benefits covered under the policy. Simply put, a right balance must be struck between the cost and benefits available.

Cover

You need to ensure that the insurance covers all your dependants and that it also covers the majority of health problems.

Thirdly, the promises made by different insurance companies are all fine; however, it depends on you whether you need a pure insurance cover or you need an insurance cover coupled with an investment opportunity. The four major kinds of insurances that most people opt from are:

• Term Insurance – Term life insurance or term assurance is life insurance which provides coverage for a limited period of time
• Endowment Policy- An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its ‘maturity’) or on earlier death.
• ULIPs – Unit Linked Insurance Plan (ULIP) provides for life insurance where the policy value at any time varies according to the value of the underlying assets at the time.
• Money-back Policy – Unlike ordinary endowment insurance plans where the survival benefits are payable only at the end of the endowment period, money back policies provide for periodic payments of partial survival benefits during the term of the policy

When comparing between these plans it is important that you keep in mind the factors that were talked about in the first point. Let’s take a look at an example:

Arun is a 25 year old businessman who wishes to take an insurance cover for Rs. 20 lakh for a period of 20 years. There are two options he can choose from.

• Option 1 – He can opt for an endowment/money-back policy and pay a premium of Rs 90,000 annually. If he survives through the policy term, he shall be eligible to receive the entire sum assured and vested bonuses, if the same are declared by the insurance company.
• Option 2 – He pays Rs 4,000 annually and enjoys the risk cover of Rs 20 lakh. Being a term insurance cover, he is not eligible to gain any survival benefit from the insurance company and the insurance premium paid can thus be treated as the cost of covering his life for 20 years.

Whereas under Option 1, he has earned an annualized return of about 6%; Option 2 gives him about 9% returns during the period. Therefore, it is important for Arun to decide what he wants and opt for a plan accordingly.

It’s important to correctly identify your dependants’ financial needs to establish just how much life insurance cover to arrange. A general rule is to choose a policy providing at least ten times your salary, but more may be appropriate, with the amount varying depending on how you intend it to be used. Basically you decide how much you want your dependants to receive in the event of your death, and your premiums will be determined accordingly. Hence, make sure you keep all these factors in mind, compare different plans and choose your cover accordingly.

When considering a life insurance policy with riders, make sure to understand the exclusions in the policy. For example, under Term Insurance, if the insured person commits suicide, whether sane or insane, within one year from the date of commencement of a term policy, the cover will become void, i.e. the nominee cannot claim the sum assured. Only the premiums paid up to the date of death will be refunded; after deducting the expenses incurred by the insurer for issuing the cover.

Why is life insurance important? Is it something that you should consider? Have you thought about your family’s financial state, or your security after you’ve retired? How will you take care of them, or yourself?

Before we get into the whys of life insurance, here’s a brief overview:

Types of Insurance

There are four types of insurance: Life, Fire, Marine and Miscellaneous Insurance. Life insurance is treated separately, while Fire, Marine and Miscellaneous insurance all fall within the General Insurance umbrella.

What is Life Insurance?

Life insurance is a policy that may be bought from a life insurance company, which helps beneficiaries financially after the owner of the policy dies. It is a contract between the policy owner (you) and the insurer (the life insurance company), which assures the paying out of a sum of money in the event of the policy holder’s death, or terminal or critical illness. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, and war. The cost or premium on your life insurance decides the type and kind of coverage you get under a life insurance plan.

Life Insurance can also be a form of savings in the long run, which we will discuss shortly, or it can be tied in with a pension plan. Life insurance can provide security, protect home mortgages, and facilitate other retirement savings.

Life Insurance in India

The Insurance Act, 1938, and Insurance Regulatory & Development Authority Act, 1999, have made life insurance in India a federal matter. Therefore, all life insurance companies in India have to comply with the strict regulations laid out by Insurance Regulatory and Development Authority of India (IRDA), irrespective of whether they are state-owned (Life Insurance Corporation of India) or private (ICICI Prudential Life Insurance, Bajaj Allianz Life Insurance Company).

Types of Life Insurance

Taking out a life insurance policy covers the risk of dying early, by providing for your family in the event of your death. It also manages the risk of retirement – providing an income for you in non-earning years. Choosing the right policy type with the coverage that is right for you therefore becomes critical.

There are a variety of policies available in the market, ranging from Term Endowment and Whole Life Insurance, to Money Back Policies, ULIPs, and Pension plans. Let’s see what each of these is about, so that you can consider the one that best suits you.

Term Insurance

Term Insurance, as the name implies, is for a specific period, and has the lowest possible premium among all insurance plans. You can select the length of the term for which you would like coverage, up to 35 years. Payments are fixed and do not increase during your term period. In case of an untimely death, your dependents will receive the benefit amount specified in the term life insurance agreement.

You can customise Term life insurance with the addition of riders, such as Child, Waiver of Premium, or Accidental Death.

Endowment Insurance

Endowment Insurance is ideal if you have a short career path, and hope to enjoy the benefits of the plan (the original sum and the accumulated bonus) in your life time. Endowment plans are especially useful when you retire; by buying an annuity policy with the sum received, it generates a monthly pension for the rest of your life.

Whole Life Insurance

Whole Life Policies have no fixed end date for the policy; only the death benefit exists and is paid to the named beneficiary. The policy holder is not entitled to any money during his or her own lifetime, i.e., there is no survival benefit. This plan is ideal in the case of leaving behind an estate. Primary advantages of Whole Life Insurance are guaranteed death benefits, guaranteed cash values, and fixed and known annual premiums.

Money-Back Plan

In a Money-Back plan, you regularly receive a percentage of the sum assured during the lifetime of the policy. Money-Back plans are ideal for those who are looking for a product that provides both – insurance cover and savings. It creates a long-term savings opportunity with a reasonable rate of return, especially since the payout is considered exempt from tax except under specified situations.

ULIP

Unit-linked Insurance Plans (ULIPs), introduced by the private players, are hugely popular, because they combine the benefits of life insurance policies with mutual funds. A certain part of the premium is invested in listed equities/debt funds/bonds, and the balance is used to provide for life insurance and fund management expenses.

Pension Plan

Insurance companies offer two kinds of pension plans – endowment and unit linked. Endowment plans invest in fixed income products, so the rates of return are very low. Unit-linked plans are more flexible. You can stop contributing after 10 years and the fund will keep compounding your corpus till the vesting date. You can opt for higher exposure in the stock market for your plan if your risk appetite allows it. Lower risk options like balanced funds are also offered.

Riders: Comprehensive coverage

In addition to the insurance plan of your choice, you might want to consider additional risk covers, in which case you can you can opt for riders: additional benefits that can be purchased with an insurance policy. Examples of riders include the Term rider, the Accidental Death Benefit rider, and the Critical Illness rider. Choosing the right set of riders ensures a comprehensive insurance cover.

When considering a life insurance policy with riders, make sure to understand the exclusions in the policy. For example, under Term Insurance, if the insured person commits suicide, whether sane or insane, within one year from the date of commencement of a term policy, the cover will become void, i.e. the nominee cannot claim the sum assured. Only the premiums paid up to the date of death will be refunded; after deducting the expenses incurred by the insurer for issuing the cover.

As important as it is to buy Life Insurance, it is even more important to pay your premiums on time. A life insurance company provides the insured with a grace period of 30 days i.e. a period of 30 days after the start date of the policy. The insured can pay premium on any day during this grace period. In case the insured dies during the grace period, the insurer is liable to pay the death benefit to the nominee less any amount outstanding (including the unpaid premium). This provision helps the insurer to minimise the risk of policy lapse unintentionally.

In these uncertain times, you’re better off planning ahead, and securing the future for yourself, and your family. Arm yourself with the facts for an assurance of a lifetime of security.

It is a known fact that one cannot foresee what future has in store! Life is so uncertain that one cannot predict whether the next moment he/she will be alive or not. Keeping this perspective in mind, it is better to be prepared to face future uncertainties ahead! An excellent way to do this is to own an insurance plan. Remember it works best for those who are aware about their privileges as an insurance buyer. Awareness about insurance comprises of the various rights that are provided to the buyer. A review made by leading finance analysis company shows that the level of awareness of rights among policy holders is quite appalling.  This article is dedicated to provide information regarding the rights one possesses as an insurance buyer.

Be aware of your rights as an insurance policy holder

Portability of a plan, what is free look period, within how many days one can settle the claim, etc are some of the questions that every policy holder must know about. To help you ask the right questions here is a check list approved by the IRDA for you to get started!

Right to get information on your insurance policy

As per the guidelines stated by IRDA, all policy holders must provide the information they ask regarding their insurance scheme by the insurer. A buyer possesses the right to enquire about all the relevant information including the benefits that he/she is liable to get from the purchased policy. To certify whether the buyer is aware about necessary information and features of the policy or not he is provided with a certificate form that is to be filled by him. IRDA guidelines clearly disclose that when a policy is sold, the particular insurance firm or one of its agent must present all the required information about the scheme to the buyer, so that he/she can foresee whether the plan is in his interest or not.

Rights regarding the Termination of Insurance Policy

If due to some reason, the policy holder is not pleased with the insurance scheme after buying it, he/she holds the right to cancel it within 15 days of inception and is also liable to get the whole amount back. In such a situation, insurance companies deduct only the surrender charges.  Most buyers remain unaware about this right and often face difficulties in such cases.

Most of the complaints regarding surrender of policy are only due to one reason and that is, the buyer doesn’t get what was promised at the time of purchasing the policy. Some agents make false commitments just to tempt the customers into purchasing a policy, so it is critical for the buyer to do his own research online and also ask friends and associates about the scheme before going ahead with it!

Rights regarding Payment of Premium

Some policy holders find it difficult to pay premium in lump sum. So IRDA has defined a right for those policy holders to change the frequency of payment of premium. To change the amount of premium one can apply in the commencement of the respective policy year.

Rights regarding Filing a Complaint against any Insurance Company:

Insurance Policy buyer holds the right of filing a case against an insurance company if he/she finds anything wrong in the procedure. Such types of issues arise mostly when a company over charges the premium from their policy holders or makes excuses at the time of maturity. In case such a situation should arise buyers often fail to take up the issue and file a case against the insurance company as no one wants the hassle of taking up such a responsibility. There is also common myth that it is next to impossible to win a case against any insurance company. If the intentions are correct and the reason to file a case is legally valid then the insurance company in question will surely be pulled up by the IRDA. To file such a case, one can contact IRDA on IGMS.  Consumer forums can also assist in this regard.

There are several fraudulent companies existing in the market today and if one’s research and understanding of one’s rights is not sound, it can be easy to get deceived. If any insurance agent makes excuses in showing policy documents, then one must force them to do so as it is one of the primary rights given to buyer.

To spot any discrepancy, it is always recommended to go through the whole policy documents or take the assistance of an insurance expert.  An insurance policy is supposed to bring financial relief in one’s life and the benefits can be better utilised if everyone who wants an insurance policy is aware of the rights they are entitled to!

Life insurance is a commercial contract between the insurance policy proposer and the insurance service provider. However, apart from customized plan of insurance policy and its coverage, there are wide ranges of insurance policies available in market under different flagship brands. Although the aim of all insurance policies are almost the same, which is providing best quality life coverage and return value of investments in the form of premium, it is extremely essential to learn the basic details about the life insurance plans and the coverage provided by these plans.

Depending on the major aim behind taking these policies, there are two basic variants:

• Protection policies - are mostly known as term insurance, the benefit of these insurance policies involve a lump sum amount against the death of the proposers.

• Investment policies – where the chief objective of the insurance policies is to assist the increase of capital by recurring/regular or single premium; whole life, variable life, and universal life policies are included in investment life insurance policies range.

The Inherent Policy of Life Insurance

Life insurance policy is meant for life coverage. Although in all sense human life is priceless, but when a bread earner of a family passes away all on a sudden it simply creates a catastrophe that is hard to withstand for rest of the family members. The coverage of life insurance cannot bring back the life but can protect the family with financial security and ensures safety of them. Hence availing life insurance policy is no doubt an extra protection for an individual and for his/her family in dire distress and in case of life penalty even.

Why to Buy Life Insurance Scheme

Security and safety are the two primary aims behind availing life insurance schemes. In some cases it is the initiative to protect kids and family in case there is any death or dire accident causing disability, etc. Insurance policy can help in two extreme conditions where an individual lives too long or dies too early. To prevent this kind of distress, life insurance policies are taken for ensuring extra protection.

• A life insurance policy provides excellent financial support for a family where the bread earner or a significant earning member has suffered from death penalty
• An apt children’s policy can finance child education and other financial needs of the family
• Availing a life insurance savings plan helps in creating a consistent flow of income in post retirement period.
• Creating extra income for improving life style
• Managing finance portfolio better
• Availing increased income tax deduction out of availing insurance policy

Life Insurance Cover: How much is Required

The actual level of cover that can be considered adequate is a highly fluid and dynamic figure as it changes from time to time and is also different for different individuals depending on their personal situations. However, the factors, which are to be taken in consideration, are,

• The  number of dependants
• The number of liability and responsibility of mortgage
• The standard of living a family is leading
• The plan for children education
• General health of the family members
• Detail analysis of the affordability
• Detail analysis of the standing asset and asst liabilities
• Forecast rates of inflation
• Forecast cost of living to maintain the current standards.

Types of Life Insurance Available

Currently the public and private players in the life insurance industry of India are offering a array of life insurance products with a host of benefits for the policy buyers. Some of the basic types of policies available in the Markey are listed below.

• Pure Term Insurance Policy: is a basic risk cover policy which protects the life insured for a pre-determined period of time as stated in the contract.
• Whole Life Policy: is a basic risk policy that provides cover throughout the life of the insured irrespective of any time fame.
• Endowment Policy: Is a policy that combines insurance cover along with savings for the insured.
• Money Back Policy: is a policy in which periodic payments of certain sum assured are made to the policy holder. In case the policy holder survives the term then the balance of the sum assured is paid to the insured.
• ULIP: is a market linked policy that provides basic life cover along with a host of investment options for creating better returns.
• Annuities and Pension: are policies that provide the insurer with stipulated sums periodically to protect against financial risks and give pension at regular intervals.

Life insurance is an essential ingredient to any kind of personal financial planning as it caters to the basic issue of security for the dear ones. Seeking professional help while deciding on the type and amount of life insurance is a smart way for beginners as it will help them appreciate the various nuances of plans and policies available in the market currently. A little research on the internet will also provide detailed comparative studies from all desired angles regarding the various policies along with the associated benefits and pitfalls.

Insurance today has several implications for people from different economic backgrounds, however the basic concept of life insurance still remains the same and universal – to provide for unforeseen contingencies of death and disability of a working or earning member of the family.

Scope

The term life insurance has financial as well as legal implications which need to be understood categorically before delving into the details of any polices.

Financial Implications: Life Insurance is a financial arrangement, which redistributes the costs of unexpected loss of life among the members of the pool. The pool is a collection of people facing common risks. All members contribute a fixed amount towards a pool called premium. In exchange for the premium payment, the person gets an assurance that a certain sum of money is to be paid to him or his nominees on the happening of the event insured against

Legal Implications: Life Insurance can be defined as a contract between two parties by which one party undertakes to make good or indemnify any financial loss suffered by other party, in consideration of a sum of money, on the happening of a specified event e.g. accident or death.

The scope of life insurance can be broadly stated under the following aspects:

• Insurance of life is a risk sharing instrument.
• Life insurance is essentially a cooperative process in which a large number of people have to taken into the fold of the insuring agency and create a pool.
• The value of the life has to be estimated in order to estimate the share of each individual in terms of premium.
• Payment contingency in case of life insurance is either at death or at the expiry of term either of which will definitely occur. Thus this contract is a contract of certainty.
• Insurance is not a form of gambling and it rather serves the purpose of eliminating uncertainty of financial situation by providing for unforeseen events. It additionally serves to increase the productivity of the community by eliminating worry and increasing initiative.
• Insurance is not a form of charity as the sum assured is paid out against regular payment of stipulated premium.

A Tool for Social Security

Life insurance is one of the most effective tools of social security across the globe. In the absence of such a provision to the common people, the society will have no redressal for pitiful elderly masses, helpless widows, unprotected orphans; the factories will have to be scrapped after a fire; the houses will not be rebuilt after being struck by any calamity. With such events and more any economy cannot be stable leave alone the growth.

Our state, unlike the socialist or a developed capitalist society where states are responsible for the deprived and destitute, is ill-equipped to do so. Constitution of India has relevant clauses under the directive principles of the state policy. In article 41, it clearly dictates the state within its monetary and development capacity shall take effective measures to secure the elementary right of work, education, employment, health and any other undeserved want of every citizen.

Nevertheless, the failure of states is evident to all, with only a few schemes floated like the one for socially disadvantaged. Providing equal rights and opportunities for all is easier said than done. In the absence of the bread winner of the family there is little that the government or other social agencies can do to look after the welfare of those left behind. The same is true even in the most economically advanced nations.

Thus in order to ensure that the people left behind continue to enjoy the same privileges in society as before and thus stay with the mainstream, life insurance is a probably the best and only social security tool against unforeseen eventualities. It not only creates security but also goes ahead to foster a respect for savings to be able to secure future of the entire family.

A Tool for Independence

One has only three resources to fall back upon when a calamity strikes: savings, charity and insurance. Savings is a slow and tedious process as on average one saves only 10% of the earnings and they consume a life time to accumulate into something meaningful that can really come handy in a crisis. Additionally the exact amount that will be required is quite unpredictable making savings insufficient at most critical junctures. Charity on the other hand is demeaning and unreliable since it is completely at the mercy of the provider. Thus insurance remains the only and most viable option to fall back upon whenever crisis takes place.

Insurance is a product of ones farsightedness and present sacrifice for future anticipated gains and is thus commensurate with his self-respect and dignity. It encourages economic independence and is thus a tool of social security par excellence. The concept of life insurance has come a long way from its inception and today also provides a smart avenue for investment where the policy holder not only secures himself against unforeseen contingencies but is also able to create wealth over a period of time by letting the money paid towards insurance be invested in market oriented instruments.

A health insurance policy is a mandatory requirement for most middle class working professionals given the uncertainty of modern living and stressful lifestyles coupled with the spiraling cost of health care in the country. However many health insurance policy holders are often caught unaware of the exact coverage as mentioned in the fine print and therefore do not get the expected benefits when they need it most. Additionally there is widespread lack of information on the rights that a policy holder is entitled to when he buys a health insurance policy. Both the features of your policy and the rights as a customer must be understood categorically in order to avail maximum benefits from the policy.

Cover for Hospitalization

This element caters for a major part of the expenses during a critical health condition and is covered by the health insurance policy in most cases. Expenses which include room rent, nursing charges, doctor’s fees, cost of medicines, diagnostics and surgical procedures will be paid for by the insuring company. However, most policies have a certain capping which is maintained in the policy document on the amount that can be paid by the insurer towards these charges. Additional expenditure if any will have to be borne by the customer.

There is some confusion among most customers regarding the 24 hours hospitalization clause. One needs to check out the provisions in the policy regarding day care procedures and treatment which does not entail 24 hours hospitalization. In most cases the policies clearly state the procedures which are covered even if there is no 24 hour hospitalization needed.

In most policies the expenses incurred hours before the hospitalization and typically up to a period of three months post hospitalization date are covered through the insurance. However the exact provisions must be carefully studied for each policy.

Pre Existing Diseases

This is yet another grey zone for most of the health insurance policy holders. Typically most policies exclude the pre existing diseases or ailments whose symptoms are present at the time of buying the policy from the insurance cover. There was great deal of disparity on this issue among various insurance companies. However from 2009 onwards the IRDA has clarified that pre existing conditions are those whose symptoms were present or for whom treatment had been initiated within a period of 4 years prior to taking the policy. After a period of 4 years these conditions or diseases can be covered.

The Waiting Period in Health Insurance Policies

It has to be clearly understood that the health insurance cover doesn’t commence immediately after taking the policy. There is minimum stipulated waiting period of typically one to three months before the cover is activated. However the insurer will pay for situations arising out of accidents during this period and not for naturally occurring ailments or diseases covered under the plan.

Exclusions from the Health Insurance Policies

Every policy has a list of diseases, conditions and medical services that are not covered by the insurer. Some of the commonly excluded cases include internal congenital disease, cosmetic surgeries, dental treatment, weight loss and alcohol abuse. Some other conditions such as cataract, piles, hernia and gallstone removal have a waiting period of typically two years after which they are included in the cover.

Co-payment Clause

In certain plans such as those catering to senior citizens there is a co payment clause which requires the insured to pay a part of the cost along with the cover provided by the insurer. In some cases the co payment clause is applied to particular diseases or conditions. New policies have come up the provision of additional premium to avoid co payment.