Questions

• What is life insurance?
• What are the benefits of life insurance?
• What is Term insurance?
• What are the benefits of term insurance?
• Should I buy a life insurance policy even if my employer has insured me in a group insurance scheme?
• What if I forget to pay my premium?
• What happens if a policy lapses?
• What does an individual do in case of loss of insurance policy?
• Will my premium amount increase after I have purchased a policy?
• How do I make a death claim?
• Is the death benefit taxable?

What is life insurance?

Life Insurance is insurance for you and your family's peace of mind. Life insurance is a policy that people buy from a life insurance company, which can be the basis of protection and financial stability after one's death. Its function is to help beneficiaries financially after the owner of the policy dies.

It can also be a form of savings in the long run if you purchase a plan, which offers the option of contributing regularly. Additionally, a little known function of life insurance is that it can be tied in with a person's pension plan. A person can make contributions to a pension that is funded by a life insurance company. These are considered private pension arrangements.

In addition, you should also make a list of what you feel needs to be protected in your family's way of life. With a life insurance policy in place, you can:

• provide security for your family
• protect your home mortgage
• take care of your estate planning needs
• look at other retirement savings/income vehicles

What are the benefits of life insurance?

The benefits of life insurance are:

1. Covers death or critical illness.
2. Covers financial interests of the family on the death of the policyholder.
3. Long term Wealth creation.
4. Life stage planning with flexibility to alter investment mix.
5. Retirement plans with options to receive annuity payments.
6. A few products offer loan facilities against the plan
7. Last but not least life insurance premiums offer tax saving benefits

What is Term insurance?

Term life insurance is called "term" because it provides coverage for a specific period or term. For this reason, it is also called "temporary" insurance. If death occurs during the term, the policy pays cash benefits to the beneficiary. However, once the term is over, and if the policy is not renewed, the coverage ceases. If death occurs after the coverage ceases, no cash benefits are paid out.

What are the benefits of term insurance?

Term insurance offers few of those advantages that you can't get with traditional life insurance policies. It has several benefits.

• Term insurance is much cheaper than traditional insurance
• Flexibility in selecting the term of the policy.
• In case of an untimely death, dependents will receive the benefit amount specified in the term life insurance agreement.
• Additional riders, such as Child, Waiver of Premium, or Accidental Death

Should I buy a life insurance policy even if my employer has insured me in a group insurance scheme?

It is always prudent to buy an individual life insurance policy because:

• The amount of insurance you are covered for may not be a very large sum
• If your employer decides on cost-cutting, you may no longer be insured
• If the individual decids to leave the employer, he may no longer be covered

What if I forget to pay my premium?

Usually, a notice would be sent by the insurance agent and the insurance company. However, it is the individual’s primary responsibility.

An insurance company usually provides a 30 days grace period (15 days if the payment mode is monthly) during which the premium has to be paid. However, if the policy lapses due to non-receipt of premium within the first three years, it can be revived within two years from the lapse date. The insurance company charges interest for the deferred payment of the policy and has the right to accept or decline reviving the policy.

What happens if a policy lapses?

A life insurance company provides the insured with a grace period of 30 days i.e. a period of 30 days after the start date of the policy. The insured can pay premium on any day during this grace period. In case the insured dies during the grace period, the insurer is liable to pay the death benefit to the nominee less any amount outstanding (including the unpaid premium). This provision helps the insurer to minimize the risk of policy lapse unintentionally.
In case the insured has not paid premiums after the grace period, the policy lapses. However, a lapsed policy can be reinstated within a certain period. The insured has to pay the insurer the accumulated due premium with interest, as well as provide a good health statement. Insurance companies offer many procedures for the insured to revive her/his policy.
In the event the insured dies and the policy lapsed within three years from the date of commencement of the policy, then the insurance company is not liable to settle such claims.

What does an individual do in case of loss of insurance policy?

Then individual needs to apply for a duplicate policy from the branch that services the individual. Upon due diligence, the insurance company will provide a duplicate policy after paying the necessary fees and executing an indemnity bond.

Will my premium amount increase after I have purchased a policy?

An insurance policy is a contract or an agreement that you enter into with the insurance company. The premium is a fixed price that you are willing to pay in order to remain insured for the term of the policy. Thus, the insurance company cannot increase the same at a later stage (unless you have defaulted on your premium dues, for a long period.)

How do I make a death claim?

In the event of death of the insured during the term of the life insurance policy, the nominee has to intimate the insurance branch. Thereafter, a claim form has to be filled and submitted to the office with the original policy documents and the death certificate.

This entire process could take up time; ranging from a few weeks to three to four months, if all the paperwork is in place. In case of complications, it could take much longer.

Is the death benefit taxable?

No. The death benefit is a tax-free under section 10(10) D, Income Tax Act, 1961.