Page Title

What is Life Insurance

Life insurance is a contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries upon the death of the insured. The insurance company promises a death benefit in consideration of the payment of premium by the insured.

TERM INSURANCE:

One of the simplest and the most affordable forms of life insurance, a term plan provides death risk cover for a particular period. In case the life insured, succumbs to death during the entire period of the policy, the insurance company pays out the death benefit to the nominee. It is a pure risk cover plan that offers high coverage at low premiums

Why should you get a Term Insurance Plan?

Why should you get a Term Insurance Plan?

• Term Insurance Plan provide large life insurance cover at affordable prices
• Term Insurance Plan helps to protect your loved ones from any unforeseen eventuality
• They can cover your financial liabilities
• They also offer tax benefits on premiums paid and the payout received
• Term Insurance Plans help during critical illness
• Provides supplementary income in case of loss of income due to accidental disabilities or illness

How to decide the right cover ?

01. COVER AMOUNT

If some of your colleagues have opted for Rs. 1 Crore cover, should you opt for the same amount too? Though there isn't any specific formula to figure out what should be the right value of your cover, many analysts offer some basic guidelines to be used as a rule of thumb

While this is only a generic method, you can also find some detailed methodologies to figure out the right value of your cover.

CALCULATING YOUR TERM INSURANCE PREMIUM

Life insurance premium is calculated through a process known as underwriting. The process employs the use of many statistical and mathematical calculations around the details of the person to be insured. Some of the major factors considered while calculating premium are –

• Age
  Young people are at a lower risk of getting life-threatening diseases. A younger person will also end up paying more number of premiums (since the tenure/term of their policy would be longer) than an older person who is likely to make a claim much sooner.
• Gender
  There have been numerous studies that say women tend to live longer than men. Hence, women have a higher probability of paying more number of premiums and thus their premium amounts are comparatively lower.
• Medical history of family
  This is an important factor in calculating the premium. A person whose family has a history of ailments such as heart attack or cancer, has increased chances of contracting these illnesses, which is why more instances of such diseases increase premiums.
• Smoking and drinking habits
  This is one of the foremost considerations for every employer because there are a lot of health-related concerns that these habits are known to cause.
• Profession
  If you have a job in industries such as transport, shipping, mining oil, gas, etc. your life is perceived to be at higher risk of accidents. Thus, the premium for you in this case would be higher as compared to a professional with a desk job.
• Term of policy
  If the policy term is longer, you'll end up paying a higher premium as the insurance company will have to cover your life for longer - meaning higher risk. Thus, a small term will have a lower premium as compared to a longer term.
• Personal health
  If you have any known illnesses or common diseases like obesity, the underwriters would scale you on a higher risk. Obesity, for example, is well known to elevate the chances of blood pressure and heart problems, even stroke. Therefore, in this case, your premium would be a little higher than that of a person who is relatively fit.

How to choose ideal suited term plan ?

How to decide the right policy term for you?

We recommend one should ideally have a term life cover till retirement because mostly people do not have dependents after retirement. Also, longer life cover increases premium. In case you have some loans or liabilities which will continue even after your retirement. You may choose your life cover accordingly. Eg: If your current age is 30 and you expect to retire at the age of 60, you should opt for a term life cover of 30 years.

Therefore, Ideal Policy Term = Your Expected Retirement Age – Your Current Age
Or
Your Expected Age to attain Zero Liability – Your Current Age?

How term insurance works in case of any mishaps?

• Full Lump Sum Payout
• Payout as Lump Sum+ Regular Monthly Income
• Payout as Lump Sum+ Increasing Monthly Income
• Payout as lump sum+regular monthly income till child turns 21
• Terminal illness benefits
• Waiver of premium
• Critiacal illness benefits

Tax benefits

With ICICI Pru iProtect Smart, along with tax benefits under section 80C for premium, you can save tax under section 80D if you opt for critical illness benefit option. Death benefit is also tax free under section 10(10D).
Enhanced protection for Life stage change
You can increase your life cover in case you get married or if there is a birth/ legal adoption for 1st and 2nd child without any medicals.

2.Whole Life Insurance

This type of life insurance provides coverage throughout the policyholder’s life, provided the policy is in force. While such life insurance policies also contain a cash value element that increases with time, one can withdraw the cash value or take a loan against the same, as per their convenience. Apart from that, in case of the policyholder’s untimely demise, before the loan is paid back, the death benefits paid to the beneficiaries will be reduced.
Best known for: Life coverage for whole life.
Benefit of Whole Life Plan: Lifelong protection to the insured and an opportunity to leave behind a legacy for heirs.

3. Money Back Policy

Another important life insurance plan, in a money back policy, a percentage of the sum assured is paid back to the policyholder at periodic intervals as survival benefit. If a policyholder continues to live beyond the term, then she will receive the remaining part of the corpus along with the accrued bonus at the end of the policy term.
However, in case an unfortunate event occurs before the full-term of the policy gets over, the beneficiaries will receive the entire sum assured regardless of the number of installments paid put. While it can be little expensive, a money back policy paves the way for a person to plan the main course of his life with a sum that is expected at regular intervals. Long-term fixed goals such as children’s higher education or their marriage can be executed in a much better fashion with the help of this policy.
Best known for: Short-term investment product to meet short-term financial goals.
Benefit of Money Back Plan: Short-term financial planning and an opportunity to earn returns on maturity.

6. Children’s Policy

As the name suggests, this segment of life insurance is curated for children. A child plan helps to build a corpus for a child’s future growth. Needless to say it even ensures a child’s education and even marriage thereafter. Most child plans in India provides annual installments or one-time payout after 18 years.
In case of an unfortunate incident, like when an insured parent passes away during the policy term, the company makes an immediate payment. Some child plans waive off future premiums on death of the life insured and the policy continues till its maturity.
Best known for: Building funds for your child’s future.
Benefit of Child Plan: Helps in fulfilling your child’s dream.

7. Retirement Policy

Also referred to as annuity plan, a retirement plan protects policyholders from the risk of outliving their income. Under this plan, a policyholder’s contribution, in terms of premiums is converted into regular periodic payments after one retires.
Somewhat similar to a term insurance policy, a retirement plan covers a policyholder’s loss of income. Since in most cases, private sector employees are not entitled to pension, an annuity plan comes in handy that provides regular income in the form of pension to the policyholder.
Best known for: Long-term savings and retirement planning.
Benefit of Retirement Plan: Helps in building corpus for retirement.

Pension Plan Types in India

It is never too early or late to start thinking about retirement plans – the sooner, the better. Whether you are salaried or entrepreneurial, there is a slew of pension plans you can choose from as listed below.