Life Insurance

The concept of life insurance was established in India in the year 1818 by the British colonial rule. Since then, it has become a financial instrument that is crucial for every Indian citizen. The British Raj instituted Oriental Life Insurance Company to initially protect their community from medical mishaps. Much later on, the benefits of purchasing a life insurance policy were extended to Indians as well.

The first-ever life insurance company of Indian origin encompassing reasonable premiums was established in the year 1970 and it was known as Bombay Mutual Life Assurance Society.

The following milestones highlight the many achievements of the Life Insurance sector in India along with how far they have come in terms of covering innumerable lives.

• Year 1818: British Raj established the first-ever life insurance business known as Oriental Life Insurance Company.
• Year 1870: The first life insurance company of Indian origin commenced its business in this year and was known as the Bombay Mutual Life Assurance Society.
• Year 1912: The Indian Life Assurance Companies Act was instituted as the first-ever decree in order to effectively manage the business of life insurance in India.
• Year 1928: The Indian Insurance Companies Act was instituted in order to equip the Government to gather statistical information about businesses operating in the non-life as well as life insurance sector.
• Year 1938: The Indian Act consolidated and amended the existing legislation to promote the insurance interests of the public.
• Year 1956: Life Insurance Corporation of India or LIC was first established in this year, and life insurance as a whole was nationalised. The LIC Act, 1956 was primarily responsible for establishing the renowned life insurance company.
• Year 1972: The sector of non-life insurance was nationalised in India. General Insurance Corporation of India or GIC, coupled with its subsidiaries were instituted in this year.
• Year 1993: India witnessed the establishment of the Malhotra Committee.
• Year 1995: India witnessed the establishment of the Mukherjee Committee.
• Year 1996: A provisional committee known as Insurance Regulatory Authority was set up.
• Year 1997: Life Insurance Corporation of India, General Insurance Corporation, and its subsidiaries receive considerable autonomy from the Indian Government with respect to flexibility incorporated in the norms/standards of investment, reorganising of boards.

Status of Life Insurance in India Today: Currently, there are 24 life insurance organisations operating their businesses in India. Out of the total companies in India, Life Insurance Corporation of India or LIC is completely owned by the Indian Government.

With life insurance, you can provide enhanced financial security to your near and dear ones. Life insurance is an integral part of our financial planning, providing financial cover to your family members even when you are no more. Life insurance policies help you prepare for life's uncertainties; they provide complete peace of mind ensuring that the future of your loved ones is secure. Also, you can pay off various expenses incurred in different phases of your life with the help of life insurance policies. The amount received as life insurance policies can be used for paying off loan and other expenses, taking loans and fulfilling various personal needs.

Following are five main reasons as to why you need to purchase life insurance:

1. To meet the financial requirements of your family: In case you are the only earning member in your family, then your dependents will need a source of income to meet daily expenses in case of your untimely death. Their standard of living is likely to be affected to a significant extent if they have no source of income, making it increasingly difficult to meet expenses related to education or other necessities. By purchasing a life insurance policy, you will be ensuring that your family will be financially secure in case you are no longer in a position to provide for them.
2. Repayment of debt: In case you have availed a home loan or a personal loan, or have borrowed funds from a colleague or friends in order to start your own business, or if you got married recently and have a relatively young child, regardless of what the case may be, it is essential to ensure that your loved ones will have the financial resources to make any repayments on your behalf in case of your untimely death. By purchasing a life insurance policy, your spouse and dependants can repay all your debts and meet expenses in your absence, thereby ensuring that they will not have to deal with additional problems in addition to coping with your loss.
3. Investment and loan options: Insurance policies not only offer life cover to customers, but can also be used to repay your mortgages and loans. Loans against insurance policies are gaining an increasing amount of popularity in recent years as it is a facility that makes it easier for customers to avail financing. Moreover, life insurance policies can also be used as efficient investment instruments. Since there are so many different types of insurance policies, they can be used for different reasons. For instance, child insurance plans, retirement plans, term life insurance policies, whole life insurance policies, etc. are not only good options as life insurance policies, but are also good investment instruments with a potential to deliver good returns.
4. Accidents and illnesses: Since life is uncertain and accidents and illnesses can occur at any time and leave you in a position where you cannot earn income for your family, life insurance policies work as a great solution in dealing with this issue. In case you meet with a serious accident that renders you disabled, or an illness that could see you incur significant expenses, you can always count on your insurance policy to not only avail treatment from some of the most effective medical institutions, but to also provide financial cover that will reduce your medical expenses while providing income for the period of time that you are unable to work.
5. Tax benefits: Tax savings are one of the least known benefits of a life insurance policy. Section 80C of the Income Tax Act, 1961, provides for tax deductions on premium payments.

Life, as we know it, is essentially divided into four stages. In a similar fashion, a life insurance policy will also have its phases and each phase will have its own prerequisites and features.

Mentioned below are the essential stages of life insurance policies that in turn coincide with the stage of life an individual is in.

1. No Insurance for Early Life: In the absolute nascent stage of our lives, we are the ones who depend on elders, and hence are known as dependants. The primary reason for people to invest in a life insurance policy is to protect their loved ones in case there is an emergency or an unforeseen event occurring in the future. At a fairly young age, children do not need life insurance policies as they are the ones who act as dependants. However, parents have the choice to invest in a plan for their children, which will typically aim at generating funds for the child’s education.
2. Insurance for Young Adulthood: This phase of life insurance typically begins when you complete your basic education and want to continue studying. You might want to move to another city/country, take up a part-time job, or simply travel. At this stage you have limited responsibilities and your focus is on your own life. Therefore, investing in a minimal life insurance policy is a reasonable choice at this point in time. However, this stage can also be considered as the time when you invest in assets on a long-term basis, for example, a car. This particular phase typically lasts till one reaches the age of 25.
3. Insurance for Old Adulthood: This phase is usually the time when people think of settling down and having a family. Therefore, a more elaborate and comprehensive cover is what people opt for. This is also the time when people start investing generously for a secure future. Some may choose to buy a term insurance whereas others might choose to stick to a standard life insurance policy. Whatever the case may be, buying a policy at this stage is imperative.
4. Insurance for Old Age: This is the time when individuals usually find themselves with increased disposable income, since most of their loans have been paid off. And with reduced responsibilities, it is a good plan to invest in a limited life insurance cover. People at this stage can also opt for a comprehensive retirement plan so that a lack of financial security does not become a burden in the future.

Few tools are as effective for long-term financial planning as life insurance. However, in order to ensure the incorporation of a life insurance policy into your portfolio, it is crucial to understand the manner in which life insurance works and when payouts can be claimed.

Life insurance works in a fairly simple manner. Customers will have to make premium payments to the insurance company at regular intervals of time, and in exchange, the company will guarantee the policyholder with a lump sum pay out to his / her beneficiaries in case of his / her untimely death. The premium payments made to the company will accumulate over a period of time and provide bonuses as well.

Benefits under a life insurance policy are usually paid out to the nominee or beneficiary upon the death of the policyholder. To receive the sum assured, the nominee will have to file a death claim with the insurance company for which he / she will have to furnish a copy of the policyholder’s death certificate in addition to any other documents as required by the insurance company. Most insurance providers take around 30 days to review the claim before deciding to make a payment or denying the claim. It takes between 30 and 60 days for an insurance company to settle the claim with a nominee or beneficiary of a policyholder. While there is no specified time frame, most insurance companies try to settle claims as early as possible because it helps them in avoiding high interest fees for delay in payment of claims.

While most claims are paid out without much concerns, there may be situations that cause the insurance company to delay the payment of your claims. For instance, in case the policyholder dies within the first two years following the purchase of a life insurance policy, the nominee or beneficiary may have to wait for a period of between six and 12 months before receiving the payment because the policy may contain a contestability clause due to which the insurance company will have to investigate the original application and confirm there was no fraud committed. A number of life insurance policies also come with a suicide clause that enables the insurance provider to reject claims in case the policyholder commits suicide within two years of taking out a life insurance policy.

Since all life insurance policies pay out a lump sum amount to the beneficiaries or nominees upon the death of the policyholder, it is essential for the nominee or beneficiary to contact the life insurance policy immediately after the death of the policyholder and commence the claims process as soon as possible. A certified copy of the policyholder’s death certificate must be obtained and submitted to the insurance company along with the original policy document and any other document requested by the insurer.

Over the past 20 years or so, an increasing number of life insurance companies have designed and made available policies that enable their policyholders to withdraw money against the policy’s face value. In case you are critically or terminally ill and need funds to meet emergency expenses, you may avail a loan or withdraw money against your insurance policy by simply submitting the necessary documents to the insurance company along with a letter that states the reason for your withdrawal.

Life Insurance policies offer several different benefits to individuals. Following are the most important:

• Risk Cover: Since uncertainties are unpredictable and may cause problems to an individual and his / her family at any time, availing a life insurance policy will ensure that your family and dependents continue to enjoy a quality lifestyle in case of your unforeseen and accidental death.
• Comprehensive Plan for Different Stages of Life: Not only does life insurance offer financial support in case of the policyholder’s unforeseen and accidental death, but also serves as a long-term investment in the sense that it encourages you to lay down your objectives, whether it is the education of your children, their marriage, constructing the home of your dreams, or even planning for a peaceful retired life. The planning will be done based on your risk appetite and life stage. Most conventional life insurance plans, such as traditional endowment plans, provide specific maturity benefits and built-in guarantees via a number of product options like Guaranteed Maturity Values, Guaranteed Cash Values, Money Back, etc.
• Cover for Increasing Health Expenses: Whether it is through stand-alone insurance policies or through riders, all life insurance providers offer financial cover against hospitalisation expenses and critical illnesses. Since health expenses are increasing constantly, the need for health insurance policies has increased too, as it ensures that the policyholder will have minimal medical costs to deal with.
• Promotes Savings in the Long Run: Since life insurance policies are long-term agreements wherein the policyholder is required to make a fixed periodical payment, it helps the policyholder inculcate the habit of savings. Saving money regularly over a relatively long period of time helps in building a good corpus which will in turn help in meeting your financial requirements at different stages of life.
• Profitable and Secure Long-Term Investment: The insurance industry is highly regulated. The Insurance Regulatory and Development Authority of India has implemented several regulations through which the money of the policyholder is ensured to be safe with the stakeholders, which means that all the money you invest in your life insurance policy will be the responsibility of the stakeholders of the company through which you avail your policy. Since life insurance is a long-term savings product, it also ensures that the policyholder focuses on long-term returns rather than focussing on risky investment decisions that could provide short-term profits.
• Guaranteed Income via Annuities: When it comes to planning for retirement, there are few instruments as effective as life insurance policies. Since you will be saving money over a period of time, life insurance policies will help in providing a steady source of income after you have retired from professional life.
• Growth via Dividends: Conventional life insurance policies provide customers with an opportunity to take part in the economic growth while taking no investment risk whatsoever. While the policyholder split the investment income through yearly announcements of bonus / dividends, the policyholder will earn maturity benefits in addition to contributing to economic growth
• Loan Facility: Individuals who avail life insurance policies will have the choice of availing a loan against their insurance policy, which could help them meet their unplanned life stage requirements without hampering the benefits provided by the policy they have purchased.
• Redemption of Mortgage: Life insurance policies serve as the best possible tool for the coverage of loans and mortgages availed by the policyholder. If there is ever any unforeseen situation due to which the policyholder is not able to repay his / her loan or mortgage, the bereaved family members will not have the burden of repayment, and the policy can be used to repay the loan or mortgage.
• Tax Benefits: Life insurance policies offer attractive tax benefits and help you save a significant amount of money which would otherwise be spent on taxes.

Benefits of Life Insurance at Different Stages of Life:

The benefits offered by a life insurance policy varies depending upon the age and life situation of the policyholder. For instance, in case you have just landed your first job and started earning, life insurance can come in handy with regards to ensuring that your ageing parents have the financial resources to survive whilst enabling long-term wealth creation for yourself. For individuals who have recently married, a life insurance policy can help in securing the future of your spouse, helping in creating long-term savings and also aiding in clearing liabilities like loans.

Individuals who have just become parents can find that a life insurance policy will help them meet expenses related to the education of their children, protecting the interests of the children, and enhancing their wealth for later use. If you are a parent with teenage children, a life insurance policy is ideal when it comes to planning for retirement and dealing with the increasing medical expenses. For retired individuals, a life insurance policy will provide regular income, and help in dealing with medical and health costs in addition to providing security for their spouse.

Regardless of what stage of life you might be in, a life insurance policy is a great investment that can help you avail financial security for you and your family, thus ensuring peace of mind.

Purchasing a life insurance policy is considered essential nowadays because it ensures that your dependents will have the financial resources to cope with their daily expenses in case of your unfortunate and untimely death. While life insurance is not necessary for every individual, it definitely plays a crucial role in ensuring the financial security of the family of an income-earning individual, and it becomes all the more important for individuals who are the sole earners in their families.

Insurance can also come in handy for individuals who wish to repay personal loans or home loans, or those who have children that require funds for marriage or higher education. In essence, life insurance policies serve as contingency plans that ensure that your nominees or family members will remain financially stable in case of your demise as the insurance company will pay them a lump sum amount. Based on the kind of policy you purchase, you can also avail a healthy savings-cum-investment instrument that will qualify you for tax benefits as well.

Thanks to advancements in technology, you can now compare life insurance policies from the comfort of your home. All you need is a computer and an internet connection in addition to a payment account such as a debit or credit card. But before you choose a policy and pay for it, it is essential that you do your homework and ensure that the policy is select has all the features and benefits that will come to good use in the future. Following is a brief description of the various policies at your disposal and the important points that must be considered before selecting a life insurance plan:

1. Term Life Insurance Plans: Term insurance policies are usually basic plans that are designed to provide financial cover to the dependents of a policyholder in case of the untimely death of the insured individual. However, term plans do not offer a payout in case the policyholder is alive on the date of maturity. Moreover, the premium payments are also retained by the insurance provider, meaning that benefits will only be paid out in case the insured individual dies. If you want to protect your family’s financial interests above everything else and do not mind if you do not receive a payment at the end of the contract, a term insurance plan is perfect for you.
2. Whole Life Insurance Plans: Whole life insurance policies cover the life risk of an individual for the entirety of his / her life. In case of the death of the insured individual, the insurance company will pay a lump sum amount to the family or nominees. The premium payments associated with whole life insurance policies are relatively high, but these policies offer maturity benefits as well as death benefits. However, the maturity benefits might not be the regular lump sum payments that are usually paid out on the date the contract expires. Instead, these policies offer a benefits when the policyholder reaches a certain age (generally between 80 and 100).
3. Endowment Plans: Endowment plans work as insurance-cum-investment instruments that pay out the sum assured to the nominees or beneficiaries of the policyholder in case of the untimely death of the insured individual. The main difference between an endowment plan and a term life plan is that the former offers death benefits as well as maturity benefits. In case the insured individual is alive when the policy term comes to a close, the premiums paid by the individual will be returned on the date of maturity along with a proportion of the total premium payments which acts as a return on your investment.
4. Money Back Plans: Money Back Plans are considered among the best and most effective insurance solutions as they offer a periodic payment to the insured individual as soon as the initial premium payment is made. In case of the untimely death of the insured individual, the beneficiaries / nominees will be eligible for the death benefits which usually comprise of the total sum assured. In case the insured individual is alive on the date of maturity of the life insurance policy, the insurance company will pay out the total premiums made by the policyholder in addition to an extra payment or bonus which serves as a return on their investment.
5. Unit-Linked Insurance Plans: Unit-linked insurance policies are investment-cum-insurance plans that are unit-linked and participatory in nature. These plans pay out a predetermined lump sum amount to the beneficiaries / nominees of an insured individual in case of the untimely death of the policyholder. Although the premium payments related to unit-linked insurance policies are relatively high, they do offer maturity benefits in case the insured individual survives the entirety of the policy term.
6. Pension / Annuity Plans: Pension or Annuity life insurance policies are non-participating, traditional plans wherein the policyholder can pay a lump sum amount to purchase an annuity. The annuity will be in the form of payouts that the insured individual can opt to receive over regular intervals of time. These plans are ideal for retired individuals or individuals who are approaching retirement age as it offer liquidity as well as life cover in the shape of a steady income stream. Unlike other kinds of insurance, the benefits provided by pension / annuity plans can be availed when the policy term is still in progress.

A thorough comparison of life insurance policies can not only help you find all the right features and benefits, but can also help in saving a considerable amount of money. Thanks to the internet, you don’t even have to step out of your house to compare life insurance plans. However, there are a few basics you must know before comparing policies if you wish to derive maximum benefits from your investment. These basics are as follow:

• Make an assessment of your life insurance requirements: Prior to commencing the comparison of life insurance policies, it is important to make an assessment of all your life insurance needs. Utmost care has to be taken when determining what you want out of a life insurance policies and what you can do without. Your life insurance requirements are bound to be unique, so make sure that you are aware of what kind of features you need. For instance, if you are above 40 years of age, married, have children, and run your own business, you will require a much higher cover in comparison with an unmarried 25-year-old employee of some company. The premiums, sum assured, affordability, renewability, features, exclusions, etc. will have to be taken into consideration. Consult an insurance agent if necessary, but make sure that you are completely sure what kind of policy you wish to purchase before proceeding to the next step.

Some key factors that should factor into choosing the right plan:

• Type of plan: While ULIPs sound appealing, money saved on lower premiums under a term ife insurance plan has the potential to be channelized into a relatively more profitable investment avenue to accrue higher returns.
• Eligibility: Choose the plan that is appropriate for your particular situation. For instance, if you suffer from a lifestyle disease, then you may not be eligible for cover with one insurance company. However, another insurance company may consider you eligible for a similar policy, but will charge a slightly higher premium. Check with as many companies as possible to check if you are eligible for a life insurance policy despite suffering from a medical condition as some will be willing you offer the same to you at a relatively lower cost than others.
• Affordability: Basic term plans are considered the most affordable as the premium payments associated with them are relatively low for the coverage terms offered. However, other plans may be slightly expensive as higher the coverage and add-ons mean that even the premium payments will be considerably high. For instance, basic term life insurance plans are less expensive in comparison with endowment plans or unit-linked insurance plans or a term life insurance plan with riders since they offer only basic coverage.
• Sum assured: The sum assured you select should be based on the amount of money you require to meet financial commitments in case you are in a condition where you can no longer earn a steady income. While a high sum assured can work out expensive in terms of premium payments, a small one might not offer exclusive coverage. It is best to choose a sum assured depending upon the financial requirements of your family and check if there are any outstanding debts that they may have to clear post your demise in addition to meeting their daily financial needs.
• Premiums: The premium amount you select should be affordable and it is important to select an amount only once you have taken into consideration all the present and future expenses (accounting for inflation). Premiums should not cause a strain on your disposable income and savings, making it essential for you to settle on an amount that you can pay at regular intervals of time without letting said payment affect your other expenses.
• Renewability: Check the renewability age in the life insurance policy you wish to purchase as it will enable you to avail maximum coverage period. While some policies do not offer the renewability feature, some do; but the age at which the life insurance policy can be renewed will vary depending upon the insurance company you choose and the factors they take into consideration. It is advised that you pick a company that offers a considerably long renewability period as it will ensure that you receive policy benefits for as long as possible.
• Features, exclusions, fine print: It is important to attain a thorough understanding of what is covered under the policy. The benefits and features, such as death benefits / critical illness rider / disability / loss of income, etc. must be understood in full if you are to make maximum use of the policy. Go through the fine print and check what benefits accrue and under what circumstances, the exclusions, the premiums charged, additional fees and costs, terms and conditions, how the claim process works and everything else that is mentioned in the terms and conditions document of the life insurance policy.
• Mode: If you have decided upon what kind of insurance policy you would like to purchase, how much premium you wish to pay and at what intervals of time (monthly / quarterly / semi-annually / annually), the amount of coverage you require, and all other important details, you will have to choose the medium through which you will be purchasing the insurance policy. The two options you can choose from are as follow:
  • Insurance Agent: Insurance agents word closely with insurance companies and have all the information you require to help you pick the life insurance policy that best suits your requirements. Agents also help in completing your paperwork and take care of all the legal requirements so that you can avail an insurance policy by going through virtually no hassles. They are the preferred method of policy purchase as they contribute greatly towards the convenience factor when availing life insurance. It is recommended that you use a qualified and licensed agent who can assess requirements and suggest the right kind of policy for you.
  • Online: An economical, convenient and increasing popular alternative to buy insurance policies is the internet. The web has grown in importance over the years and a lot of business activity is conducted online thanks to the convenience it provides. Even life insurance policies can be purchased online. If you are well-educated on insurance and know what kind of policy you need, you can purchase a plan through the internet and avoid expending money on an insurance agent. However, the online route is advised only after you have done a comprehensive research and completely understood your requirements and all the policy terms and conditions.
• Enter accurate details: Since life insurance is distinctive in the sense that everyone has their own unique requirements, it is essential to ensure that when you’re comparing life insurance plans, enter all your personal information accurately. Details such as your name, occupation, gender, health records, etc. should be entered correctly as the information requested by a website to help you compare policies is computed based on these details. There may be instance where you might be tempted to provide incorrect information in an effort to reduce the cost of the policy, but it is important to understand that any wrong or incorrect information you provide can have a relatively disastrous effect in the future, especially at the time of making claims when the company can simply reject your claims request by citing that you provided faulty information. Make sure that all the details are entered properly as doing so will help you find the most economical and best plan to meet your particular requirements.
• Don’t worry about the price: Life insurance has become a necessity in the modern world, but not all life insurance policies are cheap. In fact, some of the best life insurance policies that provide comprehensive benefits are actually pretty expensive. It might be tempting to purchase a cheap life insurance policy just to avail some sort of cover, but doing so will end up being a huge mistake as it might not deliver the benefits you desire in times of emergency. In case you find a life insurance policy that suits your needs, do not take cost into consideration. Even if you are paying a little extra money, it is important to note that life insurance is a long-term investment and the more you invest, the more will you receive.
• Compare similar policies: Once you have decided what kind of insurance policy you wish to purchase, find other similar policies and run a check on them as well. Since there are so many different options at your disposal, such as term life insurance plans, unit-linked insurance plans, endowment plans, etc., if you find a plan you like under any of these categories, try to find other such plans and compare them as it will help you find the best possible option for your particular case. It is advised that you consult insurance agents as they will have all the information about the policies in various categories and thereby help you find the perfect solution.

Purchasing life insurance need not necessarily make sense for all individuals. In case you do not have any dependents, and possess adequate assets to cover all costs related to your death, such as lawyer fees, funeral expenses, etc., then you need not take out an insurance policy. Life insurance is also not necessary in case you have dependents but also have adequate assets to cover them in case of your unfortunate and untimely death.

However, in case you are the main provider of your family and also have debts that are significantly larger than your assets, insurance will work out beneficial for you. Taking out life insurance will ensure that your dependents are covered in case of your death. While many individuals consider life insurance as a form of investment, it does not offer too many attractive benefits when compared with other conventional investment instruments. Some kinds of life insurance policies are considered as instruments for investing funds for retirement or savings, and are known as cash-value policies, and they are basically policies that help in building up a pool of money that accrues interest, and a percentage of the money will paid out to you upon the maturity of your policy.

Cash-value policies are the preferred selling instruments for insurance companies and they hire agents who aggressively promote these policies in exchange for commission. In case you wish to surrender a cash-value policy, insurance providers recommend that you avail a loan from your savings to continue making premium payments. While this solution seems easy, you will incur costs due to the loan as interest payments will have to be made to the insurance provider for the money you have borrowed.

Term insurance, on the other hand, allows you to purchase a policy that will pay out a predetermined amount of money in case of your unfortunate demise during the policy term. However, no amount will be paid in case you are alive when the policy term coms to an end. The reason this product was designed in such a manner is to ensure that your assets make you self-insured over a period of time. However, convertible and renewable term insurance policies are the best options regardless of your debts, income, lifestyle, etc. The coverage offered by them is similar to that offered by cash-value policies and they are also comparatively cheaper.

If your term life insurance policy has a renewable clause, it means that you will be allowed to renew your policy at a predetermined rate without the need to undergo a medical examination. In essence, in case you have been diagnosed with a serious illness when the policy has expired, the policy can be renewed at a competitive rate. Convertible insurance policies offer the opportunity to convert the policy’s face value into a cash-value plan provided by your insurance company when you attain 65 years of age and do not have the financial security to do without insurance. A comprehensive research and comparison of policies will help you better understand which plans best suits your personal requirements and how much coverage you will require.

Since life can be uncertain, it is essential to have a proper savings plan in place in order to deal with unforeseen circumstances and emergency expenses. One of the best ways through which you can plan your savings while also ensuring that you and your loved ones are financially secure.

There is no particular time that can be considered as the ‘right time’ to purchase life insurance as it depends on individual requirements and circumstances. The market has a number of options with varying terms and implications, and the key to picking the right policy lies in research and comparison. If you find the right policy at the right age, the benefits you reap when you most require it can be truly helpful. It is also important to consider such factors as future plans, dependents, income, etc. in order to make an informed decision about the policy term, the premium and the cover.

• Purchasing a life insurance policy in your twenties: Purchasing life insurance in your twenties can be an inexpensive and relatively easy affair as most life insurance providers take in to consideration the fact that you have the ability to make premium payments for several years after availing the policy. In strict statistical terms, they are at relatively low risk to pay out. Moreover, most people in their twenties are at a stage where they have just commenced their professional life, and, as a result, are debt free in comparison with older age groups. Therefore, life insurance companies prefer younger applicants as it helps in planning their savings and future at relatively low risk to the company.
• Purchasing a life insurance policy in your thirties: During your thirties, you are likely to have a family of your own. While your income increases, so will your need to ensure your family’s security and financial protection for your assets. In case you are purchasing a life insurance policy in your thirties, the first and foremost point of consideration should be given to your family’s future requirements. Most insurance agents and market experts recommend a policy that is 10x your yearly salary to safeguard your assets and children.
• Purchasing a life insurance policy in your forties: During your forties, investments must be made after considering factors like your retirement plans, your children’s higher education and care of aging parents. A long-term policy is recommended at this stage as it will ensure that your dependents will be covered for a significant period of time and you will also have enough time to clear your loans and mortgages. A permanent insurance policy is the best option as it offers cash accumulation as well as financial protection.
• Purchasing a life insurance policy in your fifties: Most people in the fifties do not really require an insurance policy as they will have likely cleared most of their debts and their children will quite possibly have completed their education too. However, permanent life insurance plans are a great option to consider at this stage as they can come in handy if you plan to create an inheritance for your children. Keep in mind that life insurance at this point of your life will be relatively expensive due to enhanced health risks related to old age.

Life insurance policies are often considered incomplete without riders. While term life insurance policies are the most popular kind of insurance purchased by Indian individuals, they have been designed in a manner such that they offer maximum protection to the family of the policyholder in case of his / her untimely death. However, additional financial cover can be obtained through a life insurance policy by incorporating riders into them.

Riders are basically additional features that enhance the value of a life insurance policy while providing extra benefits that are not covered by the original policy document. Availing a rider along with an insurance policy may slightly increase the premium amount depending upon the kind of raider you have purchased. If you are looking to choose an optional rider to increase your insurance cover, it is essential to understand each rider and what kind of benefits it offers. Following are the most popular riders that can be availed in addition to your life insurance policy:

1. Critical Illness:

   Since life is uncertain and we are prone to contracting medical conditions from time to time, a Critical Illness rider is an excellent option to reduce unnecessary expenses. Life insurance policies do not usually cover medical and hospitalisation expenses, which means that if you fall sick despite holding a life insurance policy, you will have to bear all the costs related to your treatment by yourself. A Critical Illness rider can prove very beneficial as it not only ensures that you have financial support when it comes to paying your medical bills, but also provides access to quality medical attention, thereby ensuring that treatments are not ignored or delayed owing to lack of finances.

   A Critical Illness rider usually covers medical expenses related to illnesses such as stroke, heart attack, kidney failure, paralysis and cancer among other illnesses. In case you purchase this rider, you can breathe relatively easy in times of ill health, knowing fully well that your insurance policy will cover your medical expenses and that your family will not have to worry about the finances in addition to dealing with the emotional trauma. Individuals who purchase the Critical Illness rider will receive a predetermined lump sum amount the moment they are diagnosed by any of the aforementioned conditions or the conditions mentioned in the terms and conditions section of the policy document.

2. Partial and Permanent Disability:

   Given the uncertainty of life, an incident or accident has the potential to render an individual disabled. In case of disability, the individual is impaired to the extent that he / she cannot work and earn the income they require to support their family, thereby affecting the lifestyles of both, the individual as well as his dependents. In such cases, the individual will require an alternate source of income to ensure the healthy functioning of his / her family. A Partial and Permanent Disability rider is the best bet in such cases as it provides staggered payments to the individual in case he / she has met with an accident due to which they are disabled and unable to work. These payments are generally a certain percentage of the total sum assured (10% or more in most cases), and ensure that you can meet your financial requirements even if you are partially or permanently disabled.

3. Accidental Death:

   The Accidental Death rider is an ideal option for those who intend on ensuring that their families have adequate financial resources in case of their untimely and accidental death. In addition to considerably high medical costs, the number of unfulfilled financial liabilities are also usually high in case of an individual’s accidental death, making it very difficult for his / her family to cope with the financial requirements.

   An Accidental Death rider comes in very handy in such situations as it will ensure that the individual’s family will receive an additional payment in case the policyholder dies from an accident. Although the basic sum assured will be paid out to the nominees upon the death of a policyholder, the Accidental Death rider provides the family with extra funds to ensure that they can manage all their expenses, thereby making it less stressful to deal with the loss of a loved one.

4. Waiver of Premium:

   In case you fail to make a premium payment on time, you will receive a notification from the company to ensure that all due premiums have been paid within a predetermined grace period. Failure to make premium payments within the stipulated time period often results in a situation wherein the policy is considered lapsed. As a result, the policy will no longer be active and you will not be eligible for the benefits upon maturity of contract. There could be a number of reasons as to why an individual may not be able to make premium payments, but regardless, the policy will be rendered useless. In such a case, the rider called Waiver of Premium can come in handy.

   Even if you cannot make premium payments for a certain period of time, be it because of disability or unemployment, purchasing a Waiver of Premium rider will ensure that your policy does not lapse so that you can enjoy all the benefits upon maturity as initially agreed. The rider will allow your premium payments to be waived off but the policy will continue as per the initial agreement.

5. Income Benefit Rider:

   The demise of a sole-earning member of any family can be a devastating loss and make it hard for the dependents to carry on with their lives in the same manner as before. If you have a family whose financial requirements are met solely by your income, it is essential to ensure that they have a regular source of income in case you are no longer able to provide for them. The Income Benefit rider is perfect for individuals who wish to ensure that their family’s lifestyle remains unaffected in case of their untimely death. As the name suggests, the Income Benefit rider provides regular income to the family of a deceased policyholder, and the amount payable to the nominees through such a rider is usually a percentage of the total sum assured. Purchasing this rider will ensure that your family will be financially secure and have lesser concerns to deal with in case of your untimely death.

Since riders offers such benefits as mentioned above, it is recommended that you purchase them if they meet your requirements. However, it is essential to do your research and make sure that you do not make any unnecessary purchases as you may end up spending money for something that you may never even use. Go through each of the riders and purchase them only if they provide the benefits that you will actually require at some point in time.

The importance of comparing life insurance policies before purchasing one cannot be stressed on enough. Following are a few simple reasons as to why it is absolutely necessary for you to compare life insurance plans online:

• Simplicity: Although life insurance plans are relatively easy to understand, comparing different policies will make it simpler to understand the benefits offered by various policies and how exactly they can be of good use to you. Moreover, there are such concepts as cash value and division of premium payments which are rather hard for the average individual to understand. Comparing different policies will make it easier to understand these concepts as you can put different features of different policies together to figure out which policy works best for you.
• Pricing: If you decide on the kind of policy you wish to purchase and proceed to actually buy it without comparing it with any other similar policy, there is a good chance that at a later date, you will find another plan that offers better benefits than the one you purchased, and that too for a lower price. Comparing different policies will make it easier to find out which policy offers what kinds of benefits and how much it costs, thereby helping you make an informed purchasing decision.
• Flexibility: Since all life insurance policies are different in the sense that they offer different benefits and features at varying prices, it is important to find a flexible policy. It is important to note that not all policies allow you to make changes to your terms and conditions once the policy term has commenced, but doing your homework before purchasing a life insurance policy can help you pick one that will meet your long-term criteria. For instance, almost all policies lapse after a certain point following the policyholder’s default on premium payments. However, comparing policies can help you find those that offer all the benefits you wish to receive while offering you the option of using riders such as Waiver of Premium. Also, comparison can help you find the best convertible and renewable policies so that your long-term goals are on track.
• Tax benefits: While insurance policies offer tax benefits in the form of exemptions, it is important to understand what kind of benefits you are eligible for. Moreover, some policies yield tax-free income, and comparing different policies can help you avail maximum benefits.
• Lower premiums: Since the premium payments for each life insurance policies is based on a set of factors, comparing different policies will help you identify those that offer the same benefits as other policies but charge a comparatively lower premium. For instance, you may purchase a term insurance policy of 20 years with the sum assured being Rs.10 lacs and the yearly premium set at Rs.3,000, but if you wish to purchase an endowment policy with the same death benefit, your premium payment could be in excess of Rs.30,000 per year, thus making it essential to compare different policies to find the one that best suits your insurance needs.

Following are the documents you will require to purchase a life insurance policy:

• Passport-sized photographs
• Age Proof (Driving License / PAN Card / Passport / SSC Certificate)
• Proof of Residence (Passport / Telephone Bill / Electricity Bill / Ration Card / Water Bill / Voter ID)
• Identity Proof (Ration Card / Voter ID / PAN Card / Passport / Driving License)
• Proof of Income (Pension Pass Book / Income Tax Returns / Form 16 / Salary Slip)

Nowadays, when you want to make your premium payments for your life insurance plan, you can do it online conveniently. The different online premium payment options include net banking, debit card, credit card, mobile banking, etc. You can also go for automatic payment options where your premium amounts will be deducted from your account directly on a quarterly, half-yearly, monthly, or annual basis depending on the premium payment mode that you choose. The payment options include eCMS, NEFT, Electronic Clearing Service (ECS), Standing Instructions (SI) mandate, Auto debit facility offered by RBI, etc. These online payment options will depend on the life insurance provider that you choose. You can make these payments by logging into the official website of the company or by visiting your bank’s internet banking portal.

Life insurance claims are made under two circumstances:

• Death of the life insured
• Maturity of the life insurance policy

Life insurance Claims in Case of Death:

Here, nominees or close relatives of the deceased makes the claim (or assignees if the policy has been assigned) in the following way:

• Inform the insurer as soon as possible with details such as time of death, place of death and cause of death.
• Submit certain documents and proofs to the insurer. This will include:
  • The death certificate of the deceased person along with the claim form as provided by the company.
  • The policy in its original form as this is a legal document and proof of an insurance agreement that covered the life of the deceased.
  • Discharge form which has to be signed with witnesses.
  • If the policy was assigned, the assignee will have to provide the deed.
  • If a claim is made by someone other than the nominee or assignee, the person making the claim will have to submit legal proof of his/her title.
  • If required, post-mortem reports and hospital and attending doctor’s reports will also have to be submitted.
  • In cases involving police inquiries, an inquest report will have to be submitted.

While these outline the standard set of documents required to process a claim, other evidence may be required such as an employer’s certificate or any other forms or reports that will help resolve any issues thrown up during an insurer’s claim verification or investigative processes.

Rules for Beneficiaries Claiming Life Insurance:

When a policyholder’s beneficiary or nominee is claiming life insurance, he or she will be required to follow certain simple rules. The nominee will have to file a death claim in order to procure the death benefit. If you have a physical insurance policy, you can take a claim intimation or a notification form from your life insurance provider. If you have an online policy, you can apply for a form online.

• Your claim intimation will need to comprise policy number, name of the policyholder, place of death, name of the insured, name of the claimant, etc.
• The nominee will first have to fill a few death claim forms and also provide some proof of death. Once the form is filed with the life insurance company, then it is established that the company has got a death claim.
• Next, the nominee will need to make arrangements for all the appropriate documents that serve as proofs.
• Then, the nominee will need to furnish these documents to the company for the claim settlement process.
• Once the forms and documents are submitted, the company will verify everything and then make a decision if it should be settled or not.

When life insurance companies calculate the premium for each individual, there are certain factors that are taken into consideration. Since life insurance is a form of investment, even low premiums have the potential to yield relatively high returns over a period of time. However, availing a life insurance policy with a low premium may not always be possible as you will have to meet some requirements as laid down by the insurer. With that said, some individuals tend to avail similar life insurance policies as others at significantly low costs. The reason for this is that these individuals have made the right life choices that have enabled to avail lower premiums.

Following are the factors that are taken into consideration by life insurance companies for the calculation of premiums:

1. Age: Age is a critical factor when it comes to determining premium rates. Younger applicants are likely to receive lower premiums while older individuals may have to pay a relatively high amount. The reason being, life insurance companies believe that younger people are less likely to contract terminal illnesses or die during the policy term. Older people, on the other hand, are at a greater risk of contracting major diseases or die during the policy term. Hence, the risk undertaken by a life insurance company is considerably lower in case of young adults, and much higher for old individuals, thereby resulting in differing premium payments for each set of individuals.
2. Gender: Although most life insurance companies do not discriminate between genders, they do believe that the life expectancy for different genders is different. Statistical studies and findings have shown that women live five years more in comparison with men, thus affecting their premium payments. In essence, most insurance companies offer lower rates for women so far as premium payments are concerned.
3. Health records: Most life insurance companies undertake a thorough research of their applicants before offering them an insurance policies. Individuals who apply for a life insurance policy will have to provide their health records so that the company can confirm that the individual has no chronic illnesses or potential health problems that might increase their risk. Individuals with clean health records are bound to avail lower premium rates while those with health problems will have to pay slightly more.
4. Medical history: The medical history of an individual has the potential to increase or decrease their premium payments. If you have no medical history of life-threatening diseases such as cancer, then you can expect a lower premium payment rate. However, individuals whose medical records show that they are prone to contract these hereditary problems will have to pay a relatively high rate of premium.
5. Smoking: Smoking is a habit that is not only dangerous, but also puts you at risk of contracting serious diseases in the future. As a result, life insurance companies are sceptical about undertaking the risk of insuring smokers. However, smokers can still avail life insurance policies despite their habit, but the premium payments that will be applicable to them are usually at least twice as much as non-smokers would pay.
6. Drinking: Consumption of alcohol is not only injurious to health in the sense that it leaves you open to potentially fatal problems in the future, but it can also affect your premium rates to a considerable extent. Alcoholics are bound to pay relatively high premiums while non-drinkers can avail life insurance policies for considerably good terms. It is for this reason why insurance companies ask you in advance if you smoke or drink.
7. Type of policy: The kind of policy you select can also affect your premium payments. The longer the policy term, the higher the maturity and death benefits. Hence, policies with longer tenures will be offered at a higher premium than short-term policies.
8. Profession: Individuals who work in dangerous professions such as fisheries, oil and gas, mining, etc., are at a higher risk of dying or contracting potentially fatal diseases. Hence, the risk undertaken by an insurance company to cover such individuals is comparatively higher than that undertaken to insure an individual who works in a bank. Therefore, individuals who ply their trade in dangerous professions are likely to face higher premiums.
9. Lifestyle choices: Individuals who live on the metaphorical edge are likely to pay higher premiums. Insurance companies take note of individuals who take risks such as climbing mountains, driving fast cars, etc., as these individuals are more likely to be a liability to them than the average customer, thereby charging them a higher premium.
10. Obesity: Obesity is related to health conditions such as Osteoarthritis, coronary heart disease, cancer, blood pressure, stroke, etc. that can lead to further complications. As a result, obese individuals are charged higher premium because they are a higher risk to the insurance company.

Once the insurance company has taken the aforementioned factors into consideration, it will determine the amount of premium applicable to an individual, making it essential for you to ensure that you lead a healthy lifestyle and make the right choices in order to avail the best possible rates.

The premium charged on your life insurance policy is the amount of money levied by insurance providers for coverage. The premium charged by each company may vary, making it important for you to compare different policies to find the one that best suits your requirements. However, there may be times when the quote for a premium may differ from the premium that is actually charged as it will depend on the manner in which the premium is computed.

Mathematical calculations and statistics done by the insurance provider’s underwriting department will determine the premium charged to an individual. In most cases, the statistical data regarding the health, age and life history of an individual are taken into consideration when computing the premium. For instance, a youngster driving a fancy sports car will likely have to pay a higher insurance premium in consideration with a middle-aged individual who drives a sedan. The underwriting process is applicable to all individuals who wish to avail life insurance, and it entails investigation of filial illnesses, analysis of reports such as motor vehicle reports and medical information bureau.

Once the underwriting department of your insurance provider has gather all your information and analysed it, an actuary will scrutinise it further to determine your risk to the insurance company. The actuary will also forecast how likely you are to make a claim on your policy, and the higher your chances of making a claim, the higher your premium payment will be. The actuary will also peruse mathematical information after which he / she will compile “mortality and sickness” tables based on which potential losses you will incur due to illnesses and death will be noted. There tables are used by actuaries to create models that ascertain how likely an individual is to contract illnesses or die. The premium charged to you will be determined by these results.

There could be several reasons as to why you may want to cancel your life insurance policy. It could be because you no longer possess the money to make premium payments. It could be because you have a dire need to cash out the policy. It could be for any reason, but regardless of the reason, it is relatively easy to cancel your life insurance policy. Following are a few tips on how to cancel your insurance policy:

• Visit the website of the company from which you purchased a life insurance policy: Regardless of whether you have purchased a policy from a regional or large national insurance provider, visit their website to check their cancellation policy. The website of the company can be found on any correspondence piece that you have received from the insurer. You can also run an internet search for the website by typing your insurance provider’s name.
• Contact a broker: Prior to the cancellation of the life insurance policy, it is advised that you establish contact with an experienced broker and clarify whether or not you are making the right decision. Even if you are convinced about cancelling the policy, it is best to talk about it to an expert as it will help you better understand whether or not you are doing the right thing by cancelling your policy. Individuals who have no brokers can contact their life insurance company and request for one.
• Contact an accountant: Cancellation of life insurance policies can leave the door open for tax implications. Earnings and excess premiums help in building up the cash value for universal and whole life policies. When a policy is cancelled, a cheque for the specific amount is cut by your insurance company, and this amount may or may not qualify for tax deductions. It is therefore essential to contact a seasoned tax professional as he / she will have answers to all the questions you may have about the tax implications associated with the cancellation of a life insurance policy.
• Consider partial withdrawal policies: Individuals who have purchased universal life insurance policies are usually allowed to withdraw a partial amount from their policy without the need to completely cancel their policies. Partially withdrawing funds from your policy will free up some funds that can be used immediately, and, at the same time, will still leave some funds in the policy so that your family members / nominees are covered in case of your untimely death. However, partial withdrawal is somewhat similar to taking a loan against your life insurance policy, and it can have consequences, making it instrumental for you to consult a broker before considering partial withdrawal. For instance, some policies lower the death benefit when you opt for partial withdrawal and you will not be allowed to repay the amount withdrawn in an effort to raise the amount again. Moreover, in certain situations, you will have to pay a tax on the amount you wish to withdraw from your policy.

Steps to Cancel Your Life Insurance Policy:

If you are absolutely certain that you will be cancelling your life insurance policy, following are the steps that can help you do just that:

1. Follow the procedure: In case you wish to cancel your life insurance policy, the insurance company will require you to fill out the cancellation form. A few personal details along with details regarding the policy will have to be entered in the form, and a copy of the same must be kept with you.
2. Present everything in writing: In case you wish to pose any questions to the life insurance company, or make any declarations, make sure you do it in writing. For instance, if you wish to find out how the penalty charges associated with cancellation are computed, you could fire an email instead of getting your solutions over the phone. Written queries have a better chance of receiving responses, and documentation helps in settling any potential disputes between a policyholder and the insurance company.
3. Revoke automatic payments: In case you make premium payments automatically via your credit card or checking account, these payments can be cancelled by calling your credit card company or your bank. You will have to contact your credit card company or bank at least three business days prior to the scheduled withdrawal. Cancellation can also be requested over the phone, but most banks require you to follow up on the same in writing as in most cases, the verbal cancellation request is rendered ineffective after a fortnight.
4. Following up: In case invoices for premiums are continued to be sent to you, you will have to contact the insurance company through a letter and include copies of any documentation that was retained at the time of cancelling the policy. In case a premium has been deducted by mistake from your checking account, a refund must be requested in writing.

General Rules to Keep in Mind when Cancelling your Life Insurance Policy:

Your life cover can be cancelled within the predetermined cooling off period. A refund of all the premium payments you have made will be given to you, but there will be no refund of premium payments in case claims have been made while the cooling off period is in progress. In case your premium payments have been made in advance on an annual basis, a refund of the premiums you have paid will be computed on a pro rata basis after deducting the applicable stamp duties and cancellation fees. The request for cancelling the policy must be provided to the insurance company in writing.

Implications of Cancelling Your Life Insurance Policy:

Cancelling your life insurance policy cover can have several implications. They are as follow:

• Future Need for Life Insurance: Prior to cancelling your life insurance policy, you will have to take into consideration the fact that circumstances and your requirements will probably change over a period of time. As a result, during the latter phase of life, it could be harder for you to avail a new life insurance plan. Your health condition as well as your age play a crucial factor in determining your premium payments, which means that you will be subject to higher premium payments the older you get. There is also the possibility that you will have to pay extra loading for new medical conditions. It is important to note that the cost of life insurance policies is relatively high for individuals who are 45 years of age or older, making it essential for you to be completely sure before cancelling your policy.
• Consideration about Dependents: Since unexpected injuries, illnesses and death can strike at any time, it is essential to ensure that the future of your family is financially secure. In case you are unable to provide for your dependents, a life insurance policy comes in handy. So before you cancel your life insurance policy, be sure that your nominees are well covered with regards to their daily living costs, mortgage repayments, education expenses, funeral costs and health insurance.
• Restructure of policy instead of surrender: In case you are looking to surrender your life insurance policy because you are low on finances and need to cash out your policy, consider the option of restructuring your policy in a manner such that premium payments become more affordable or by lowering your cover. 

• Do your research: Given the number of options at your disposal when it comes to selecting the right insurance provider and then choosing the policy that best suits your requirements from the vast array of options, it is essential to do your research before purchasing a life insurance policy as it can not only help you save a good amount of money, but it can also help you receive maximum benefits. Make sure that you have also checked up on the insurer to ensure that there are no unexpected hassles in the future.
• Go through the terms and conditions: The terms and conditions document of your insurance plan contains all the information regarding the policy. Most people do not pay attention to every detail and as a result, end up dealing with disastrous consequences in rather difficult situations when making claims. Make sure that you read the fine print completely and understand it fully before purchasing an insurance policy.
• Consider lock-in period: There are instances when individuals purchase insurance policies but realise within a few days or weeks that they are not entirely satisfied with the terms and conditions of the policy. In such cases, some insurance companies offer a free lock-in period, which is a short span of time in which a policyholder and return the policy to the insurer for no penalty or charge. Lock-in periods are usually 15 days long, so make sure you purchase a policy with the aforementioned feature as it will make it easier for you to return the policy and purchase another in case you are not happy with your initial purchase.
• Consider premium payment options: Most insurance providers offer premium payment options on an annual, semi-annual, quarterly or monthly basis. It is instrumental that you pick a time period that will allow you to make premium payments without other consequences. Regardless of your premium payment option, it is also advised that you choose the Electronic Check System to make premium payments as it will ensure that you make never miss a payment date.
• Don’t hide anything: There are instances wherein individuals try to conceal some information when filling out the application form and purchasing an insurance policy. Your medical history has to be accurately presented to the insurance company, and you must also notify them if you are a smoker as every detail requested by them is an important factor in determining the terms and conditions of your insurance policy. Missing or misleading information can cause major problems when trying to make claims, even a total rejection of claims in some cases.

Life insurance involves the payment of an amount of funds when the insured individual dies or once a certain period is completed. It also helps in minimising the risk by migrating it from the policyholder to the insurance provider.

Life insurance mainly focuses on risk management and risk pooling. It helps people in attaining financial security instead of being stuck when certain unforeseen and unfortunate incidents occur.

Some of the most important and common principles of life insurance include both parties (insurer and policyholder) having good faith, policyholder having insurable interest in the insurance offered by the company, the insurance company’s readiness to offer compensation when a damage or loss occurs, the principle of subrogation where the policyholder has the right to claim the amount from the insurer, etc.

Life insurance products function according to 3 aspects and they include interest earnings, mortality, and expenditures of developing and maintaining the insurance plans, etc.

The most important thing to do before taking out a life insurance policy is to evaluate and understand your insurance requirements. Following are the points you will have to consider before purchasing a life insurance policy:

• Debt: Regardless of what kind of debt you may have, be it loans, credit cards, mortgages, or car loans, they have to be repaid in full before you can apply for a life insurance policy. In case you have a mortgage worth, Rs.20 lacs and a car loan worth Rs.2 lacs, you will have to have a minimum of Rs.22 lacs in your policy for the coverage of your debts.
• Income replacement: The terms and conditions of your life insurance policy will depend largely on income replacement. For instance, in case you are the sole provider for your dependents with an annual salary of Rs.10 lacs, you will require a policy payout that is not only sufficient to substitute your income, but also slightly additional to guard against inflation.
• Future commitments: In case you wish to pay for the education of your children or their marriage, an estimate of the costs will have to be created so that they can be added to the amount of coverage you wish to avail. For instance, if your annual income is Rs.10 lacs and you have a mortgage of Rs.40 lacs, and also wish to send your child to university for Rs.20 lacs, the ideal coverage in this case would be around Rs.1.4 crores as you will require around Rs.1 crore to replace your annual income, Rs.40 lacs for the education expenses and Rs.20 lacs for your mortgage expenses. After the face value has been ascertained by your insurance provider, you may start looking around for a policy that will best suit your requirements.
• Insuring family members: There are bound to be other people who you would like to insure. It is advised that you only insure individuals whose death would translate into a financial loss for you. For instance, a child’s death may be an emotionally turbulent affair, but it does not leave you with a financial loss. On the other hand, an income-earning member’s death will not only affect you emotionally, but also financially. In such cases, income replacement strategies can be incorporated to help you determine whom to insure and for how much.

• Insurer and Insured: The insurance company that sells a life insurance policy to an individual is called the insurer while the individual who purchases said policy is the insured.
• Grace Period: When a life insurance policyholder is unable to make his / her premium payments on time, he / she will receive an extension from the insurance provider to ensure that the due payment is made. This extension period usually spans between 15 and 30 days and is called the grace period.
• Free-Look Period: In case you are not satisfied with the terms and conditions of an insurance policy, or, for any other reason, would like to cancel the policy, you may do so during the Free-Look period without having to pay any fees or penalties like surrender charges.
• Lapsed Policy: When a policyholder fails to make premium payments on or before the due date, and does not make the payments even after the grace period, the insurance company ceases the benefits offered by the policy and terminates it on account of non-payment. Such a policy is called a lapsed policy.
• Death Benefit: Upon the untimely death of a policyholder, the nominee or beneficiary will be eligible to receive a payout from the insurance company. This payout is called the death benefit.
• Accident Benefit: In case you meet with an accident and are covered by a life insurance policy, there may be a clause in your policy which covers all the costs related to the accident, like medical expenses, hospitalisation expenses, etc.
• Sum Assured: The total amount of money guaranteed to an individual at the time of maturity of a life insurance policy is called the sum assured. The sum assured does not include bonuses that may be added at a later date.
• Cash Value: In case the life insurance policy of an individual is voluntarily terminated prior to the date of maturity, the life insurance company will pay the customer a certain sum of money called the cash value. The cash value of the policy is its present value and the cost at which it can be sold.
• Claims Settlement Ratio: The ratio of claims that has been paid by the insurance provider to the nominees of a policyholder and the overall number of claims received from customers is called the claims settlement ratio. The other claims are usually either denied for reasons such as fraud, misrepresentation, impersonation, etc.
• Reinstatement: In case an insured individual does not make the due premium payments for any reason, and the insurance company, as a result, decides to terminate the insurance policy, the policyholder will have an option to renew the coverage, and the process of making a lapsed policy active again is called reinstatement.
• Rider: Insurance companies offer customers the option of adding extra features to their policy at a nominal fee. These extra features that can enhance the value of your insurance policy and deliver additional benefits are called riders.
• Moral Hazard: When a policyholder is involved in events or situations that could increase the risk of an insurance company to incur additional costs on behalf of that particular individual, he / she is known as a moral hazard.
• Vesting Age: The age at which an individual starts to receive payouts from the insurance company is called the vesting age.
• Bonus: The additional amount of money received by an individual when the policy term is active, or when the life insurance policy matures, considering that he / she has made all premium payments as required for a certain number of years, is called a bonus.
• Convertible Term Life Insurance Policy: Convertible term life insurance policies allow the policyholder to convert the term life insurance policy to a permanent life insurance policy. However, there will be a specified time limit for the customer to make such a conversion.
• Renewable Term Life Insurance Policy: Term insurance policies that have a clause that enables beneficiaries to increase the policy term for a specified period of time are called renewable term life insurance policies.
• Policy Term: The total number of years for which an individual will be covered by an insurance policy is called the policy term.
• Premium Paying Term: The total number of years for which a life insurance policyholder will be making premium payments to the insurance company is called the premium paying term. Premium paying terms are usually the same as policy terms.
• Single Premium Life Insurance: Single premium life insurance plans are those that cover individuals for a certain period of time and guarantee payment to benefits to nominees upon the untimely death of the policyholder, provided that the policyholder has made a lump sum payment as premium.
• Waiver of Premium: Policyholders have an obligation to make premium payments at regular intervals of time. Waiver of Premium is a rider that can be purchased in case the policyholder is disabled or seriously ill, and, as a result, is unable to make premium payments. Waiver of premium ensures that you continue to receive the benefits from your insurance company even when you can no longer afford to make premium payments.

Many employees in India can get life insurance with the help of their employer. This is known as the employer-employee structure. The employer will purchase insurance from the insurance company and then the employee will be insured. This brilliant facility is being offered by many employers in order to retain and motivate employees efficiently. When life insurance policies are offered by the company, employees get attracted and stimulated to work at an organisation. The attrition rate will also minimise with the provision of life insurance.

You can check with your employer if you will receive life insurance. Under the employer-employee structure, the employee will receive the benefits of the policy and also tax benefits. You will not have to pay any tax for such an insurance policy. You can buy any type of life insurance under this particular structure.

Your company will most likely offer a life insurance policy to employees if it is a sole proprietorship firm or a legal or corporate firm with at least 5 employees who can purchase the life insurance policy. Your employer will need to draw a single cheque to offer coverage to its employees.

Eligibility Criteria for Availing Life Insurance Offered by Employers:

When an employer offers life insurance policies to its employees, certain eligibility criteria need to be met:

• The policyholder will need to be at least 18 years old and lesser than 60 years old.
• The policyholder can be an Indian employee or an NRI.
• An NRI employee can apply if the employer that is offering the policy has an office that is registered in India.

With the insurance sector maturing vastly over the last few years, people are becoming more and more aware about the importance and absolute vitality of insurance policies (both health and life). Indian citizens have rendered themselves proactive and with the constant help of financial advisors, planning in advance has become ever more easy.

Surge of NRIs in India: With an increase in the number of Non-Resident Indians wanting to invest in Insurance policies in India, the platform has become extremely expansive. A Person of Indian Origin or PIO and a Non-Resident Indian has the full liberty to buy a life insurance policy in India to assure their lives. Multiple insurance firms and companies have now begun to re-strategise their policies to suit the needs of PIOs and NRIs.

As most of you must be aware, a term insurance plan is essentially a pure protection policy, and hence makes the most sense to be purchased for the security of an entire family. Multiple insurance companies in India have various term plans that are completely suitable to the needs of an NRI or a PIO. With the help of a questionnaire, this kind of an insurance policy can be bought in a jiffy. They are not entirely different in their structure, however individuals may customise their policies as per their needs.

However, in India, currently a handful of insurance companies have a streamlined system in place to help the NRIs with their policies. Whatever requirements are there, whether it be a medical test or simple documentation, the employees of these companies will always be at your service. Given below are few of the firms who have a systemised structure in place:

1. LIC or Life Insurance Corporation of India
2. Max Life Insurance
3. ICICI Prudential Life Insurance
4. Kotak Life Insurance

NRIs may also choose from certain insurance policies that depend wholly on the country where the person is residing currently, their age, and other valid information.

Location: If you are an NRI seeking life insurance policies in India, then you should bear in mind the fact that your geographical location will not be taken into account for doing so. However, for the medical test, you might need to visit the place of origin.

No Extra Premiums Whatsoever: If the risks involved are more or less the same, then there will be no difference in the premium rate of resident and non-resident Indians. The premium cost will be impacted if the involved risk is increased for some reason.

Digital Payment: An NRI can opt to pay digitally through a foreign nation’s remittance, or a bank account with an Non-resident ordinary (NRO) nature, and through a Non-resident (NRE)/Foreign Currency Non-Repatriable (FCNR) account.

Benefits such as death and maturity can also be deposited through the above-mentioned methods. If you are paying the premiums in a foreign currency, your proceeds will be rendered wholly repatriable. However, this will not bear any effect on the policy or the proceeds status whatsoever.

Now, even SMEs can provide life insurance policies to its employees. They only need to fill a proposal firm which mentions that they would like to go for the employer-employee scheme and that it will be paying premiums for its employees. The form will need a signature from a certain authorised party working at the company. The form will need details such as names of employees who want coverage, type of insurance plan, policy period, riders, and sum assured. There should also be a stamp or seal of the organisation.

The organisation will need to fill and sign both the nomination form as well as assignment form and furnish these forms to the insurance company at the proposal stage.

The employer will need to fix the insurance quantum according to the CTC of the different employees, work experience, qualification, and previous work records of the employees.

Life insurance is not exempted from GST (Goods and Services Tax). The introduction of GST will have an impact on the life insurance industry. The insurance premiums will most likely increase from 15% to 18% in the insurance sector. If you are paying premiums for health, car, and life insurance, you will be affected heavily.

GST Code for Life Insurance:

Under the GST regime, there is a Services Accounting Code (SAC). This code is applicable only for services that come under GST. The SAC for GST classification for life insurance services (not including reinsurance services) is GST Code for Life Insurance. Similarly, the SAC GST code for pension services is 997131.

The on-going debate surrounding the linking of Aadhaar to insurance policies, and a string of other important services had previously created some confusion among policyholders and citizens availing these services. As per an earlier Supreme Court ruling, it was mandatory to link your Aadhaar details to not only insurance policies, but also your mobile number and a number of other facilities. The deadline given for the same was 31 March 2018. However, in a second ruling which was passed on 13 March 2018, the Supreme Court said that the deadline for linking Aadhaar has been extended indefinitely, till a judgement is announced for the same.

The implications of this decision for insurance policyholders are varied, depending on whether you are an existing policyholder, or are looking to purchase a new insurance policy. Existing policyholders will not be required to link their Aadhaar to their policy, until a decision on the matter is announced by the Court.

However those who are looking to buy a new life insurance policy will be required to provide their Aadhaar and PAN/Form 60 details at the time of registering for the policy. This means that new insurance policies will need to be linked to the policyholder’s Aadhaar number, for which IRDAI has granted policyholders 6 months, starting from the date of registration. If the policyholder does not have an Aadhaar Card, they will be required to provide any other “officially valid document”, from the list of documents mentioned in the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005. These documents include your driving licence, passport, PAN card, job card issued as per Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), and the voter identity card issued by the Election Commission of India.

1. How do I choose the best life insurance policy?

   Choosing a life insurance policy depends on your financial protection needs. Ideally, life insurance should be opted for to provide financial protection to your dependents in the unfortunate event of death. Term insurance policies are considered the best form of pure protection as they offer the highest coverage for the lowest premiums. These plans offer only death benefits. To receive maturity or survival benefits as well as death benefits, you will have to opt for TROP policies, endowment policies, pension or annuity policies, money back policies or ULIP policies.

2. Why do term insurance policies offer higher life coverage than other types of insurance policies?

   Premiums paid by a term insurance policyholder are fully utilised towards creating a life cover. Under other types of life insurance plans, only a part of the premium paid is allocated towards creating a life cover. The balance is utilised to provide for maturity benefits or as in the case of ULIPs a part of the premium is used to meet administration and sales expenses. This makes term insurance plans more affordable than other plans. This is why they are also called pure protection plans because they only offer a pay-out in the event of death of the life assured. Other plans offer returns as well as life coverage.

3. How do I choose the sum assured and tenure of my life insurance policy?

   In general, it is recommended that a person avails a cover that is at least 20 times his/her current income. However, this depends on your personal financial situation and personal profile. If you have to provide for many dependents, you would need a larger cover. If you are young, you should opt for a longer term life cover to take advantage of lower premiums. As you grow older, premiums rise for the same sum assured. Again, if you don’t have other savings avenues, a large sum assured will serve the purpose better. Always, remember to account for inflation as well. Consider loan obligations or debt that will have to be serviced in your absence. Many people ensure the chosen sum assured will cover debts in their absence. Another pertinent factor is affordable. Higher the sum assured, higher the premiums.

4. Do life insurance policies cover only death or accidents and illnesses as well?

   Life insurance policies are meant to provide financial sustenance in the event of death, primarily. However, most policies offer additional coverage for disability, accident and various illnesses. These are called riders and usually come at an additional cost although some policies do offer them as part of the primary plan.

5. Are there any tax benefits offered on life insurance policies?

   Yes, premiums paid are deductible U/S 80C, U/S 80CCC, U/S 80D, U/S 80DD and death benefits are tax exempt U/S 10(10D). This is subject to prevalent provisions of the Income Tax Act, 1961.

6. Is it safe to buy life insurance online?

   Yes, these days almost all insurance providers offer online purchase of life insurance. Additionally, a number of financial services providers offer this option through their websites, where you can compare and choose from a number of providers. The fact that people are increasingly turning to online purchases of life insurance policies signifies how secure the process is. Online purchases offer policyholders of comfort and convenience and in many cases the policies are cheaper since there are no sales agents involved.

7. Can premiums be paid in instalments or are they payable in a lump sum?

   Depending on the type of policy chosen, premiums can be paid either in a lump sum or in regular instalments.

8. What is the difference between a reversionary bonus and terminal bonus?

   Bonuses are offered under participating life policies i.e. policyholders can participate in the profits of the policyholder’s fund. A reversionary bonus is declared as a percentage which applies to the chosen sum assured. Reversionary bonuses can be simple or compounded bonuses. One-off reversionary bonuses are those that are paid out of one-time profits that may not occur again. A terminal bonus is the residual bonus declared on maturity or the policy i.e. if after declaration of all reversionary bonuses, there are still profits accrued to the fund, it may be paid out to the policyholder in the form of a terminal bonus.

9. What are ‘premiums'?

   Premiums are the amounts paid by the policyholder to the insurance company in order to keep the policy in force.

10. What is a ‘bonus’?

    Under certain plans, insurance companies give policyholders a share in profits. This amount is called a bonus and accrues to the policyholder at no extra cost. It is awarded at certain times during the policy period. Bonus amounts are decided by the company and are paid out in addition to the chosen sum assured. Certain plans guarantee bonus payments.

11. What are ‘riders’?

    Riders are specific to certain situations or events whereby the insurer pays the policyholder a certain amount of money when such event occurs. E.g. critical illness or disability rider. They are an additional benefit to a standard policy for higher premiums.

12. What is a policy’s ‘free-look period’?

    As per IRDA regulations, if a policyholder does not wish to continue his/her policy they can discontinue the same within the first 15 days of buying it and get a refund.

13. What is the ‘surrender value’ of a policy?

    If a policyholder wishes to cancel his/her policy, once in effect, they can surrender it to the insurer and receive the surrender value as a refund. The surrender value is calculated based on premiums paid and how long the policy was in effect. Surrender is usually allowed after a certain period of time.

14. What is meant by ‘assignment’ of a policy?

    If, for example, a policy is used to raise a loan, the policy is ‘assigned’ or transferred to the lender. The policy then bears the lender or the ‘assignee’s’ name. Once the loan is repaid the policy can be reassigned or transferred back.

15. What must I consider before purchasing a life insurance policy?

    When purchasing a life insurance policy, the most important thing to check is whether or not guaranteed returns will be provided by the plan. You must also keep an eye on the lock-in period, information regarding premium payments, the implications of defaulting on premium payments, the revival conditions, the fees that would be charged for cancelling or surrendering the policy, the availability of a loan facility, etc. Go through the terms and conditions of the policy you wish to purchase and make sure that it meets all your requirements for an affordable cost.

16. How important are proposals and all the disclosures that are made in them?

    Proposals are key components on insurance and policies are underwritten based on the disclosures made in them. It is essential that you provide only correct disclosures and statements to the insurance company or you will be at risk of rejection of claims.

17. What medical reports will I have to submit to avail a life insurance policy?

    Insurance companies may request medical reports from applicants depending upon the age at which they purchase the insurance policy, their age when the policy matures, personal and family history, sum assured, and other factors they consider crucial. For instance, if the applicant is obese, special reports such as Glucose Tolerance test or Electro Cardiograms could be requested. Similarly, depending upon your medical condition, the insurance company may ask you for one or more reports.

18. How do life insurance companies calculate the surrender value of an insurance policy?

    The surrender value of a policy is usually a percentage of the policy’s paid-up value. Insurance companies calculate the surrender value of an insurance policy based on the surrender value factor, which is the ratio between the premiums paid and the period for which premium payments have not been made.

19. Can I avail a loan through my life insurance policy?

    Some insurance companies provide loans against insurance policies to their customers. The amount of money you can avail through such a loan is usually a percentage of the insurance policy’s surrender value.

20. What are the formalities involved when submitting a maturity claim?

    Almost all insurance companies send an intimation along with the discharge voucher to you at least two to three months before the date of maturity. The intimation will inform you as to how much money you will be receiving from the insurance provider. The discharge voucher as well as the policy bond must be duly signed by the policyholder and returned to the insurance provider as soon as possible as the sooner you do so, the sooner will they be able to release your payment. In case you have assigned the policy to another individual, only the assignee will be authorised to receive the claim amount at the time of maturity.

21. What are settlement options?

    At the time of purchasing a life insurance policy, the insurance provider may design and define the manner in which you will receive the payout. Settlement options are offered by most insurance companies and they ensure that you receive your money in a manner that was specified when you were purchasing the insurance policy.

22. What are the documents that my nominees must furnish in case I die during the policy term?

    In case of your unfortunate and untimely demise during the policy term, your nominees will have to furnish such basic documents as the policy bond, the claim form, and the death certificate of the late policyholder. There may be instances wherein the insurance company may also request you to furnish other documents like a post mortem report, a police inquest report, an employer’s certificate, a hospital certificate, a medical attendant’s certificate, etc. The policy bond usually contains all the information associated with the claims process.

23. How will I figure out if the agent who is selling the life insurance policy to me is authorised or not?

    Insurance agents are usually representatives of specific life insurance companies and have the authority to offer advice on any product that is sold by that particular insurance company. All agents who deal with the sale of life insurance policies are registered with the IRDA. All agents also have a basic requirement to pass an examination before undertaking to sell insurance policies. In case you are purchasing an insurance policy through your agent, make sure that you request for his / her authorisation card attained from IRDA.

24. What are the major differences between a non-participating policy and a participating one?

    A non-participating insurance policy is one that does not allow the insured individual to share in the profits made by the company, while a participating policy ensures that an insured individual has the right to share in the profits of the company. However, the dividends or bonuses declared by the insurance company may increase or decline based on the life funds’ investments returns.

25. How are individual risks ascertained by insurance company before they sell you a policy?

    The mortality or risk class of an applicant will be calculated based on an underwriting procedure through which the insurance provider can determine whether or not the applicant is a risk worth taking. The risk of death is calculated based on many different factors like the age of the applicant, the sex, medical and personal history, occupation, habits, etc. The decision of the life insurance company to insure the life of an applicant will depend on the details you have mentioned in the application form. Make sure that all the information you enter therein is accurate as inaccurate information has the potential to cause problems at the time of making claims.

26. What does the company do in case I do not make premium payments on time?

    Insurance companies provide something called a grace period to customers who are unable to make premium payments on the due date. The period usually spans for 15 to 30 days, and customers who default on their premium payments are expected to pay during this period. Failure to do so will mean that your life insurance policy has lapsed. As a result, you can either reinstate or revive the policy within a predetermined period of time.

27. What happens if my policy is cancelled during the free-look period?

    Cancellation of policies during the free-look period can be done free of cost. However, in case you wish to cancel your life insurance policy after the free-look period, you will be charged a small fee for the same.

28. What is the payout granted to an individual who surrenders his / her life insurance policy?

    When a life insurance plan has been active for a specified number of years (usually at least five), the policy acquires a cash value. Every life insurance policy has a savings portion called the cash value. The cash value of a life insurance policy adds up when the worth of premium payments made by the policyholder exceeds the cost of insurance. This excess amount is transferred to a cash value account where it accrues interest. In case you choose to surrender the policy, the company will offer you the cash value or surrender value of the policy. However, please note that surrendering an insurance policy prior to the end of the maturity period will make you incur a significant loss.

29. How much does life insurance cost?

    The cost of a life insurance policy will be determined by the premium payments you have undertaken to make to the insurance company. The number of premiums and the cost of each premium, in turn, will be determined by your age at the time of purchasing the policy, the kind of life insurance policy you purchase, the sum assured, and the policy term. Premium payments are payable on an annual / semi-annual / monthly basis.

30. What benefits does a life insurance policy provide?

    A life insurance policy essentially ensures that your family is financially secure in case of your unfortunate and untimely death. That apart, life insurance policies also offer tax benefits. The premium payments you make towards your life insurance policy can be deducted under Section 80C of the Income Tax Act. However, the total amount of money deducted under Section 80C cannot be more than Rs.1.5 lacs. Moreover, life insurance policies can also be used as a financial planning tool as most insurance policies in the market today come with built-in savings element that enable you to ensure that both savings as well as life cover can be possible. Life insurance companies also cover hospitalisation costs, making them beneficial instruments that ensure that you have access to quality healthcare. In addition, the riders that can be purchased along with a life insurance policy will significantly reduce expenses. For instance, if you purchase a Critical Illness rider, you will receive a lump sum in case you are diagnosed with conditions such as cancer, heart attack, coronary bypass, kidney failure, stroke, paralysis, Alzheimer’s disease, vital organ transplants, etc.

31. Can I find a policy that will pay me money while the policy term is still in progress?

    Money Back policies are the best bet in case you want a policy that will pay out during the course of the policy term.

32. How often will I have to make premium payments?

    Premium payments can be paid based on the discretion of the policyholder, but the options available to you will be monthly, quarterly, semi-annual and annual.

33. Is it better to buy life insurance policies at a young age?

    Yes, purchasing a life insurance policy at a relatively young age, such as in your twenties, can help you avail the plan for significantly low premium.

34. Is it better to purchase a life insurance policy from an agent or should I only purchase one from an insurance company?

    While life insurance companies are the most reliable sources when it comes to purchasing life insurance policies, insurance agents are not totally untrustworthy either. However, before you purchase a life insurance policy from an insurance agent, it is advised that you request for their authorisation card from the IRDA to ensure that they are certified sellers.

35. When does life insurance cover begin?

    Your life insurance cover will start on the date of commencement after the insurer has received and approved of your insurance application. It is also known as Risk Commencement date.

36. Are life insurance premiums fixed?

    The premiums of life insurance policies usually do not change and remain fixed for the term of the policy which is decided by the policyholder. Some policies have single pay or limited pay options also where the premiums can be paid in one lump sum or over a period of a few years.

37. Can older people buy life insurance?

    Yes, older citizens who are above the age of 60 can also purchase life insurance policies. There are various types of insurance policies like term life policies, whole life policies and guaranteed life insurance policies which are designed to provide cover to older individuals. LIC and Reliance offer life insurance plans specially designed for senior citizens.

38. Can I get life insurance for my parents?

    Yes, you can get your parents insured under a life insurance policy. Depending on their age and health, you can choose from a range of life insurance policies which are specifically designed for older individuals or senior citizens, as the case may be.

39. Are life insurance pay outs taxable?

    As per the provision of Section 10 (10D) of the Income Tax Act, 1961, any sum assured amount received under the policy, along with any bonus that is paid by the policy at the time of its maturity or on the survival of the life assured, is tax free. However, there are certain conditions following which the policy proceeds may be taxed.

40. How much life insurance cover does a person need?

    When it comes to life insurance, one person’s requirements will differ from another’s. The amount of life insurance cover that one requires depends on various factors such as their income, their liabilities, and their expenses. After calculating all of these, you can determine how much life insurance cover would be adequate for you.

41. Is it better to take a single cover policy or a joint life insurance policy?

    In case of single cover policies, both individuals are covered under separate and independent policies which have no effect on each other. However, under a joint policy, both individuals are covered under one policy. In case of a mishap where both individuals lose their life, their beneficiary will receive only a single pay out, while in the case of two single policies, there will be two pay outs, one from each policy.

42. Do life insurance premiums increase with age?

    Premiums for various kinds of life insurance policies like whole life policies remain fixed for life, as they do for term insurance policies. However, for term insurance policies, if you wish to renew the policy after the end of the policy term, the premiums may significantly increase in order to cover the risk of a higher age.

43. Who is the claimant in a life insurance policy?

    The person who files a claim on a life insurance policy is known as the claimant. In case of the life insured suffering injuries not amounting to death, the life insured will become the claimant.

44. What is modified death benefit?

    A policy which features a modified death benefit usually has a waiting period before it pays out the full death benefit to the beneficiary.

45. What is a graded premium life insurance policy?

    Graded life insurance is one of the lesser known types of insurance. This whole life policy features initial premium which are lower than other similar policies. However, the premium increases every year for a fixed number of years, after which it stays fixed till the policyholder owns the policy. This type of life insurance is suitable for those individuals wish to get covered but may not be able to afford the premiums of a life insurance policy. With a graded policy, they can take advantage of the lower initial premiums which eventually stabilize after a few years. Graded premium policies are also known as graduated premium life insurance policies.

46. When does life insurance cover begin?

    Your life insurance cover will start on the date of commencement after the insurer has received and approved of your insurance application. It is also known as Risk Commencement date.

47. Are life insurance premiums fixed?

    The premiums of life insurance policies usually do not change and remain fixed for the term of the policy which is decided by the policyholder. Some policies have single pay or limited pay options also where the premiums can be paid in one lump sum or over a period of a few years.