What is Life Insurance?
Life insurance is an arrangement wherein you (the policyholder) purchase in financial protection (insurance policy) from the insurer (insurance company) by paying the insurer small amounts (premium) at regular intervals.
This ‘protection’ is in the form of a pre-agreed amount that we’ll call ‘life cover’ or ‘sum assured’. This protection kicks in either after a certain amount of time (i.e. maturity period) or if something untoward happens to you during a set period.
By investing in a life insurance plan today, you are securing your family’s tomorrow. Plus, life insurance plans are affordable, which means you are preparing for life’s contingencies without disturbing your current financial goals. In this way, you can rest assured that your loved ones can continue to maintain the lifestyle you have worked so hard to give them, no matter what.
Life is all about the little moments that we enjoy with our loved ones. But these moments can be interrupted with an unforeseen event, leaving your family high and dry. That’s why, getting a life insurance is the first step towards creating a safe and secure future for your loved ones.
Things to note for your life insurance premiums
Nicotine And Tobacco Usage
Personal Medical History
Family Medical History
(e.g. heart disease or cancer among immediate kin)
While you’re calculating the right insurance amount to suit your lifestyle, also note that there are certain factors that govern the premium that you need to pay. Essentially, these factors are linked to your life expectancy and hence may differ for everyone. Other factors can include lifestyle, job profile and driving record.
What Aegon Life offers you?
At Aegon Life, you can rest assured knowing that you and your family’s unique needs are being heeded and fulfilled. Here are some of the insurance products that Aegon Life offers that will equip you with what you need to keep your loved ones protected, no matter what.
Let’s look at the products on offer
Sometimes known as ‘pure’ life insurance because it pays out the death benefit to the policyholder’s family. Aegon Life offers six life term plans with various benefits, including the iTerm Plus plan that covers 36 critical illnesses.
- Aegon Life iTerm Plus Insurance Plan
- Aegon Life iTerm Insurance
This is a unit-linked product combining insurance and investment, where you bear the investment risk. A part of the premium is used to provide insurance cover while the remaining is invested in various equity and debt schemes. Aegon Life’s ULIP category has two plans iMaximize and iInvest, which together, offer death and maturity benefits, tax benefits, partial withdrawal facility and investment flexibility.
- iMaximize Plan
- iInvest Plan
- Future Protect Insurance Plan
- Rising Star Insurance Plan
This ensures future financial support to your child, as the money accumulated can be used to tide over an unforeseen financial crisis. iMaximize, Aegon Life’s online Unit-Linked Insurance Plan that offers a combination of protection and market-linked returns, can also cater to your child’s needs in your absence through the Triple Benefit pay-out option, which provides financial relief in stages.
- iMaximize Plan
Life insurance may not purely be a retirement plan, but that does not mean it can’t have a place in your retirement planning. Aegon Life’s Insta Pension Plan assures you financial independence after retirement, offering lifetime income, annuity options (life annuity and joint life annuity) and double pay-out mode (annual and monthly).
- Insta Pension Plan
Savings and Investment Plan
Savings and Investment Plan
A life insurance policy can double as a savings and investment plan to help you shore up resources and tackle future financial needs. Aegon Life’s iGuarantee is one such; it offers assured returns on the premium, providing pay-outs for six years and a sum assured to your family in your absence.
- Pos GRIP
This popular life insurance scheme offers life coverage during the policy period, with maturity benefits paid in instalments instead of as a lumpsum at the end of the term. Aegon Life offers the iReturn Term Insurance Plan that provides death benefits along with an in-built terminal illness cover. However, unlike a simple term plan, you get your money back if all goes well–that is, you get back the amount you pay as premium, by the end of the term.
- iReturn Policy
Whole Life Insurance
Whole Life Insurance
In whole life insurance, the premium paid builds cash value that can be used later in life. In Aegon Life’s whole life term plan–iTerm Forever–your nominee will get the sum assured (and not merely the premium paid) in your absence.
- iTerm Forever Insurance Plan
Why should I buy life insurance?
If you have a home loan, or you plan to send your child overseas for higher education, or build that farm house post retirement, a life insurance will come in handy for all your financial needs. Whatever your dreams may be, having a life insurance is just like having a warm blanket on wintry mornings.
A life insurance plan protects you and your loved ones from life’s uncertain moments and keeps you financially prepped for the same. Plus, you should buy a life insurance so your loved ones get to live the life you planned for them, even when you’re not around to provide for them.
How to buy a life insurance policy online?
Life insurance is an essential part of your financial portfolio, making it possible for you to give your loved ones a secured future. So, whether life presents you with a prestigious education opportunity for your child or your dream-home, this plan can help fund such goals.
When buying a life plan, there are certain things you must keep in mind:
- Your age–this is critical
- Amount of life insurance needed
- Family situation (number of dependants)
- Debts (if any)
- Risk appetite
- Annual income
- Required riders (if needed)
- Future financial goals
One of the easiest ways of buying a life insurance plan is buying it directly by visiting your insurer’s website. The process is as simple as placing an order for your favourite food, albeit with more research than just scanning through the menu card. Aegon Life offers a host of insurance plans, customised to your need. Assuming you want to buy iTerm Plus Plan online, this is how it will work.
Let us consider all the benefits that buying life insurance policy ensures
As Anil Gupta’s case highlights, life is full of uncertainties, and an insurance cover ensures a protective shield for your loved ones so they may continue to enjoy the quality of life they are used to in case of an unforeseen event.
Insurance is a highly regulated sector, and the Insurance Regulatory and Development Authority of India (IRDAI) ensures the safety of the policyholder’s money deposited with life insurance companies. Life insurance is thus a long-term savings instrument
Policyholders have the option of taking loans against their policies without upsetting the policy benefits. This is another way by which a life insurance policy helps you meet unforeseen financial challenges.
Life Insurance is one of the best instruments for retirement planning and earning through annuities, as the money saved during a policyholder’s working life ensures a steady source of income after the person’s retirement.
Except in the case of term plans, there are investment benefits as well: retirement plans, child insurance plans, whole life insurance plans, term life insurance plans etc. are all good life insurance policies with investment options. Traditional life insurance policies (endowment plans) also offer in-built guarantees and defined maturity benefits through a variety of product options such as money-back and guaranteed cash/maturity values.
This is something that is often glossed over – being a long-term contract, life insurance requires you as a policyholder to pay a fixed amount at defined intervals, thereby instilling a habit of long-term savings. It discourages policyholders from taking risky investment decisions for short-term gains. Diligent savings over many years helps to build a decent corpus needed to meet financial needs later.
Life insurance provides protection and savings over the long term as traditional policies are viewed as a long-term commitment, assuring policyholders financial protection as well as long-term wealth creation.
Income from investment in life insurance products is distributed among policyholders through annual announcement of dividends/bonus. This allows them to participate in the economic growth of the company without making risky investments.
According to the section 80C of the Income Tax Act, 1961 (of Indian penal code) premiums paid towards a valid life insurance policy can be exempted from the taxable income. Along with life insurance premium, section 80C allows exemption for other financial instruments such as Employee Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), health insurance premium are some of them. The total amount that can be exempted from the taxable income for section 80C is capped at a maximum of INR 150,000. The exemptions are eligible for individuals (Indian citizens) or Hindu Undivided Family (HUF).
Types of Life Insurance
Just like every family has a unique story. Let’s look at the type of insurances and their benefits in detail
Besides providing a safety cushion for your loved ones even when you are not around, the premiums paid on term insurance is exempt from tax under Section 80 C of the IT Act. Even the claim/maturity amount that you receive on outliving the policy is exempt under Section 10 (10D). However, smoking habits may affect the premiums you pay (more reason to quit!).
An acronym for Unit-Linked Insurance Plan, ULIPs provide a life cover that protects your family and lets you invest in the equity market, so you can grow your money. The best ones to choose are those that include benefits such as fund switching options, income tax benefits, high returns in the long term, life cover, and loyalty additions. Note that you, as the investor, will have to bear the risk of the investment.
This is a life insurance product designed to save for your child’s higher education expenses. In case the parachute doesn’t open when you skydive, it takes care of your child’s education. You can begin by making small investments for a short tenure and start receiving regular pay-outs for a fixed period, and by the time your child wants to switch from an engineering to a DJing course, you’ll have the money already ready.
An insurance plan that protects your loved ones in case something unfortunate happens to you, and covers your retirement plans when you don’t, what’s not to love? Life insurance can be used as a retirement savings vehicle, a tool to supplement other specific retirement plans to meet your retirement goals, or as an investment option that offers dual benefits of life cover as well as growing your wealth.
Savings and investments
Life insurance can also be considered a great savings and investment tool, especially if you have set some definite goals. Endowment plans are good savings and investment options. Similarly, if you want to improve your financial condition, investment plans offer good returns as they are linked to the market. Compare various plans to see which ones offer maximum returns.
Instead of getting paid all at once at the end of the term, you have the option of getting returns in intervals. The frequency and period of pay-outs differ from company to company and plan to plan. This policy could provide you with money at certain intervals that can help meet various financial goals (buying a house or car, children’s marriage, etc). Plus, it has a low risk element and guaranteed returns.
Whole life insurance
: This form of insurance has two components –benefits to the loved ones in case something untoward happens to you and a savings portion called the cash value, which grows as interest accumulates. Interestingly, you don’t have to pay any tax on investment gains until the funds are withdrawn (also called ‘investment growth on a tax-deferred basis’). You can emit more payments than the scheduled premium, which will help you build your cash value. Further, you can reinvest dividends into the cash value and earn interest. If you wish, you can make a withdrawal or take a loan on interest. Withdrawals will not impact the death benefits.
|Insurance Plans||Cover||Sum Assured||Premium||Savings/Profit||Maturity Benefit|
|Term life||Get life cover||Receive sum assured as per plan upon the insurer’s death||Lowest among all plans||No savings or profit received||No maturity benefit or payout on survival|
|Whole Life||Get life cover||Receive assured sums + bonuses||High premium due to inevitable payout and cash value build-up, but lower than endowment plans||Offers savings and wealth creation on your premiums||Assured sums + bonuses, if any, in the form of maturity claims upon completing a stated age OR upon expiry of premium payment term from date. Guaranteed payout on survival.|
|Endowment Plans||Get life cover||Receive sum assured upon survival||Payable every month, but over a shorter period as compared to whole life||Wealth creation tool for long-term goals||Sum assured +bonus on maturity (if policyholder survives term).|
|ULIP||Get life cover+ market-linked benefits||Get sum assured on life cover as per plan||The entire amount is paid as premium, but deductions made for various fees before unit purchase||Wealth creation tool for long-term goals||Returns depend on market value of the funds where investments were made|
|Moneyback||Get life cover as per plan||Assured payment at regular intervals as percentage of sum assured||Premium higher than that for endowment||Percentage of sum assured at regular intervals +balance sum assured + applicable bonuses.But returns are lower than that of endowment plans due to higher premium and lower bonus.|
i Note: All types of insurance plans enjoy tax benefits.
How much life insurance do I need?
“Alright, I get it, life insurance is much more than just pre-emptive planning, but how much life insurance do I really need?”
While it’s difficult to state the exact amount of life insurance you may need, it is important to make a sound estimate. To do this, consider your current financial situation, long-term financial obligations, and estimate how much your loved ones will need in the coming years to maintain the same lifestyle.
The ideal life insurance coverage for everyone is unique, as the financial situation varies from person to person. However, certain factors can be considered to arrive at the appropriate amount of cover.
To fix an appropriate insurance amount, it is important to first arrive at realistic future earnings based on your age, current salary, and growth prospects. This will give you an idea of how much income your dependents will need. Also, don’t forget your current lifestyle.
Calculating an appropriate future income
Let’s take the case of my friend Mr. Raj is a 30 year old man who earns ₹ 5 lakh annually (about ₹ 42,000 monthly); he is planning to work for 30 years more, if he plans to retire by 60 years. Would an insurance cover of ₹ 1 crore be too much?
Not really, even if it seems a like a fortune right now
- At 7% inflation rate, the value of ₹ 1 crore would whittle down to ₹ 33 lakh in 15 years
- This means what ₹33 lakh would have got Raj today, would be worth ₹1 crore after 15 years, thereby indicating that while the prices have increased, the value of money has come down. So, Raj would not be as prepared as he thinks he is right now.
- Hence, it is important to ensure that the life insurance amount you decide is enough to take care of your financial liabilities (home loan, car loan) and responsibilities (child’s higher education, marriage).
Choosing a life insurance plan
Thinking of which insurance plan, you should opt for? If you keep certain things in mind, shopping for the right plan will become easier.
If paying premiums is an issue, it makes sense to take a term insurance policy, as the premiums here will be less than that for endowment plans and money-back plans. Here are a few things to know about term plans.
Additionally, many plans offer riders that amend the coverage or terms, enhance the insurance cover, and provide flexibility. Examples of such riders are.
- A term plan is the simplest insurance plan, where your family will be paid a lump sum amount
- The premium is less expensive in case of term plans
- Term plans can cover you well past your retirement age
- Term plans also offer pay-out options such as:
- Monthly payments for a specified period (5, 10, or 15 years)
- Increasing monthly payments for a specified period (by 5% or 10% annually)
- A combination of lump sum pay-out and monthly payments, again for a specified period paid to your loved ones should something happen to you
- Accidental death benefit
- Accidental total and permanent disability
- Waiver of premium
- Hospital cash benefit
Ideally, you should take all these into consideration while calculating an appropriate insurance amount.
Calculating your life insurance premium amount
- Realistically estimate your future earnings
- Factor in your age, current salary, growth prospects, current lifestyle, and inflation
- Shop around for the right plan for yourself
- If you are 30 and your annual salary is around Rs 5 lakh, an insurance amount of Rs 1 crore is reasonable for a 30-year period
- This takes care of your financial liabilities and responsibilities
- Term plans are the cheapest and cover you past your retirement age
- It has various payment options
- It offers add-on benefits called ‘riders’
You may seek professional help in the matter, or you can use Aegon Life’s premium calculator to arrive at a figure on your own.
When should I buy life Insurance?
“Okay, I understand life insurance is an important financial instrument, but I’m still in my late twenties. Maybe I should consider getting a life insurance a few years later?”
Valid point! There are much better benefits of taking a life insurance policy early in life. Let’s look at the right age to buy life insurance
Whatever your age – 20s, 30s, 40s or more – it is always a good idea to get insured. But yes, younger policyholders pay less for life cover and covers for critical illnesses or disability. So, it would be good to get yourself insured before you turn 35.
If you are in your 20s
Twenties are the best time to take a life insurance policy because you get additional benefits, such as, lower premium rates, bigger corpus, early development of saving habits (God knows how many of us really need this!), and more room to experiment with higher risk investments.
If you are in your 30s
By now you would probably have begun a family of your own, or be planning one. The financial security of your family and the future of your children gain prominence. Life insurance should be a part of your financial planning now; there is the plain term plan, but the money-back and child plans are also good options.
If you are in your 40s
This is the time when you will get serious about life insurance: because your income is contributing to your family’s income, you need to manage your dependent parents and their medical expenses, and your children’s educational expenses. Experts advocate a plain term plan at this age, or debt-oriented funds for insurance-cum-investment plans. You should also start planning for your retirement.
If you are in your 50s
Why get insured now? At this age, you may have outstanding debts and mortgage or your daily expenses can eat up your life savings post-retirement. A retirement plan at this stage will help you amass a sound corpus by the time you retire.
If you are in your 60s
It is never too late to get insured for the reasons already mentioned: financially securing your loved ones, making up for lost income, paying off outstanding loans. So, despite the high premiums, it makes sense to have insurance even at this age.
Why life insurance riders are important for me?
“Okay, that sounds great, but you also spoke about life insurance riders, what’s that all about?”
Looks like you’re really getting a hang of how insurance works.
A rider is basically an add-on or a paid feature to your base term plan. A rider aims to upgrade the scope of your basic policy coverage. But what benefits do they bring? Are they worth the additional money? Do they truly provide complementary coverage? If you are staring at a list of riders and wondering whether to consider them, let us look at some essential add-on benefits that can enhance your term plan and help you decide.
Riders attract higher premiums. But term insurance riders make sense if you consider the scenarios explained below. Their inclusion in a life insurance policy can help both you (the policyholder) and your family (the dependants). Here are some examples of riders available for term insurance:
This term rider offers you an additional sum assured if something untoward happens to you due to an accident. But even if you don’t buy this rider, you will still be paid the basic sum assured.
A lump sum amount is paid in case you as a policyholder have been diagnosed with any pre-specified illness mentioned in the policy, such as heart attack, cancer, stroke, paralysis etc. If detected, coverage may continue, terminate, or be lessened by the amount paid to you.
Waiver of Premium
This lets the coverage run for a limited time if you, as a policyholder, are unable to pay the premium. In a way, it ‘insures’ the premium payment till the policy expires. There is no ‘death benefit’ if the premium is ultimately not paid.
Income Benefit Rider
This rider is mainly for income generation in case something unanticipated happens to you (the policyholder); it ensures that your dependents get supplementary income every year for 5-10 years along with the regular sum assured.
Permanent and Partial Disability
Life’s uncertain, and this rider comes as godsend if the policyholder faces permanent or temporary disability due to accident. In such an eventuality, most policies pay out a certain percentage of the sum assured for the next 5-10 years.
“If a child, a spouse, a life partner, or a parent depends on you and your income, you need a life insurance”
- Size Orman, Author and Financial Advisor
Which factors influence your life insurance premiums?
Just like any service or product that comes with a price tag, an insurance premium is the amount you pay the insurance company for the policy you buy. You can either make the payment all at once, as a lumpsum, or in instalments and the plan will be valid for a year. However, not everyone pays the same premium amount. As it depends on several personal details and the kind of insurance policy you pick, this sum can vary from one buyer to the next.
Look at the different factors that influence your premium:
You and your spouse might live in the same house, eat the same food and even share similar habits. That, however, does not mean that both of you would pay the same insurance premium. Your gender, age, job profile, lifestyle, whether you have addictive habits (smoking or drinking), your family’s medical history, and even seemingly irrelevant information such as your annual income and details of daily commute are all considered by your potential insurer. You are then assessed on these factors to arrive at an appropriate premium.
- Age: The younger you are, the lower the premium you pay
- Gender: If you are a woman, you will usually attract lower premium than a man of your age and similar health and background. This is because the average Indian woman lives longer than her male counterpart, as has been corroborated by World Bank data
- Addictive habits: If you are a smoker, your premium would be higher than that of a non-smoker of your age and gender. However, if you are a woman, your premium will be lower than that for a male smoker.
- Medical history: Insurers may ask for your health records and may even ask you to undergo a medical test to check your weight, cholesterol levels, blood pressure, and other metrics that could indicate higher medical risks. Your premium is likely to increase, if your family has a history of high-risk hereditary diseases, such as heart disease or cancer.
- Lifestyle & Occupation: Is your life an adaptation of GTA or does your work entail feeding crocodiles? If your job poses health risks or if you have adventurous hobbies, expect your premium to be on the higher side. (Paragliding is considered a risky sport; being an airline pilot is a risky profession).
- Type of coverage: Have you ever bought a smartphone? If you did, you would know that the price increases along with the features and benefits. Insurance works in pretty much the same way. The level of coverage you choose determines your premium. For example, basic health insurance could cost much less than an elaborate term insurance policy. However, add a rider, like Critical Illness, to your health plan to increase the scope of coverage and the premium increases too.
- Sum assured: What will also have a bearing on your premium is the sum assured: the greater the sum assured, the greater is the premium.
Not as complicated as it’s made out to be, right? Well, regardless of how easy it is to buy life insurance, there’s one hurdle that stands in the way of most people making this move – the claim process.
How to process life insurance claims?
There is a notion that claims are easily rejected and insurers will make you or your loved ones run from pillar to post for the money. Claims don’t get rejected if you file them correctly and if you’ve been honest with the information right from the time of buying the policy.
Let’s understand the nitty-gritties of the claim process
You can make a life insurance claim if something untoward happens to the insured person, and the policy matures.
So, can you march straight into the insurance company’s office and make the death claim? Not exactly. There are a few steps that you need to take first.
- The claim intimation must be sent to the insurance company as early as possible and should ideally be done by the nominee. However, even close relatives or the agent who handled the policy can do this.
- The claim intimation should clearly state the date, place, and cause of death. If you are unsure of these details, ask the agent to help here. It is part of their job profile.
- The insurance company will then ask for the following documents:
Making a death Claim
- Filled-up claim form (provided by the insurance company; for instance, Aegon’s death claim form is very easy to handle):
- Death certificate (signed by an authorised doctor)
- Original policy document
- Deeds of assignments/reassignments, if any
- Legal evidence of title, if the policy is not assigned or nominated
- Form of discharge executed and witnessed (by signing a discharge and release form, the claimant declares that the insurer has delivered the insurance benefits and waives any further or future claim against the insurer in respect of the insured)
- Other documents such as medical attendant’s certificate, hospital certificate, employer’s certificate, police inquest report, post-mortem report, etc.
Making a maturity claim
What happens if the policy matures and the insured is still in good health? Can you file a claim then? The answer, is yes, and here’s how you can file a maturity claim.
- Usually, it is the life insurance company that sets the ball rolling, intimating you that your policy is about to mature
- The insurer also sends discharge voucher 2-3 months prior to the date of maturity, mentioning details such as the maturity amount payable
- As the insured party, you must sign the discharge voucher, get your signature attested and return the voucher to the insurance company along with the original policy bond
- Sometimes a policy is assigned in favour of an entity such as a housing loan company (which keeps the policy document as collateral for giving loans); in that case, this entity will fill in the discharge form. The claim amount will also be paid to it.
Honesty is the best policy
- When applying for insurance, be completely honest and transparent with all the information you provide. Hiding facts such as smoking or pre-existing diseases can be counter-productive: if found out, your insurer can refuse a claim due to non-disclosure of correct information.
- Similarly, when filing a claim application: all the information you provide, including the date, location, and cause of death must be correct. Inconsistencies in the data may hamper your claim.
What is life insurance?
Life insurance is a contract between an insurance company and the insured whereby the company guarantees payment of an agreed amount (called death benefit) to the named nominee if something untoward happens during the policy period or at the end of the policy, termed as maturity. The insured needs to pay regular premiums to the insurance company for the policy to be valid.
Why is life insurance important?
If you buy life insurance, you are doing it for the financial security of your family, which relies on you, and to get multiple benefits such as tax exemption and planning for your child’s higher education.
If my age is 30 and annual salary is around Rs 5 lakh, how much cover should I be looking at?
If you are around 30, you have another 30 years of working life ahead of you. Your current annual salary is around Rs 5 lakh, but you will be getting raise every two years or so. Hence, you could look at an insurance amount of Rs 1 crore. Remember to consider inflation as well.
How do I process a life insurance claim?
In general, beneficiaries and insured persons can make a life insurance claim in either of the two following cases: (a) if something untoward happens to the person for whom the insurance policy has been taken, and (b) the policy matures. You need to inform the insurer, fill in the relevant forms, and submit the documents requested.
What is premium?
It is the money that the policy buyer pays the insurance company on a regular basis (monthly, twice a year, or annually) in lieu of the guarantee of the death benefit
Who decides what the premium amount should be?
The insurer does, and the amount depends on several factors that can impact the insured’s life expectancy, such as age, gender, smoking habit, personal medical history, and family medical history (such as heart disease or cancer among immediate family members).
Is the gender of the insured important?
Yes. The average Indian woman lives longer than the average Indian man, therefore, the premium for women is lower than that for men of the same age, everything else remaining the same including smoking habit.
Why is nicotine-use a factor for determining the premium?
Nicotine use becomes a factor in determining the premium because a non-smoker is expected to live longer than a smoker–in any country.
What if the premium is not paid?
If premium remains unpaid one month after the due date (that is the ‘grace period’), the policy will lapse. In that case you, as the insured, will have wasted all the premiums you have paid in previous years. Additionally, your beneficiary will also not receive a pay out as the policy will be deemed ‘lapsed’.
What happens if the insured dies before paying the due premium?
If the insured dies during the plan term, before he or she can pay the premium, the due premium will be deducted from the death benefit.
If the insured pays all premiums and does not die during the term period, do they get the sum assured?
In case of a term life insurance policy, there are no paybacks. So, if you as the insured buy a standard term insurance, and you outlive the plan, you get nothing. But do not forget that your primary objective is to create a protective financial umbrella for your loved ones. For other plans, except term plan, you get the money after the policy matures.
Are there no monetary benefits from investing in term insurance?
Besides insuring your family, this type of life insurance offers various tax deductions and exemptions. Under Section 80C of the Income Tax Act, you can claim a deduction of up to Rs 1.5 lakh on your policy premium. Even the proceeds that your loved ones get in your absence or the amount you get at the maturity of the term is tax-free. Learn all about tax benefits here.
Can I create wealth from life insurance?
Absolutely! But for that, look for a policy with maturity benefits. Most people are unaware of the additional benefits apart from the death and disability benefits. So, check out the various types of life protection plans: Here are a few to consider
WHOLE LIFE: Regular premiums until death, after which the corpus is paid to beneficiaries; no expiration;
ENDOWMENT PLANS: Sum assured is paid under both scenarios – death and maturity;
ULIP: Risk cover plus investment options, assured pay out;
MONEY-BACK: Insurance-cum-investment with periodic returns as a percentage of the sum assured.
Is there anything else I can do with my policy?
Yes, insured persons have the option of taking loans against their policies without upsetting the policy benefits.
Does Aegon Life have all this?
Aegon Life has all this, and more. Aegon Life offers term plans, whole life, ULIP, money-back, retirement plan, and child plan. Check the website here for more details.
When should I buy life insurance?
Whether you are in your 20s, 30s, 40s or more – it is always a good idea to get insured.
What are insurance riders?
A rider is an attachment or amendment that supplements the term plan coverage, helping the insured meet specific needs. There are various types of riders
- Accidental death and dismemberment
- Critical Illness
- Waiver of premium
- Income benefit
- Partial and permanent disability
Can life insurance claims be rejected?
Yes, the insurer can reject a life insurance claim on grounds of
- Misrepresentation of actual information
- Non-disclosure of correct information
Does life insurance not cover any particular type of deaths?
Claims of death due to drunken driving, accidents while inebriated, self-inflicted wounds, murder, death in a war or known violent area, dangerous hobbies like skydiving, and death due to sexually-transmitted diseases are not entertained.
Does life insurance requirement change as we grow older?
This depends on the policy. In term plans, the basic costs, coverage limits, and requirements remain the same for the duration of the policy. For whole life plans, it may remain unchanged sometimes, but mostly they will have changing terms over that timeframe–the changes occur when you renew the policy.
The changing requirements at different life stages
Having a life insurance policy gives you more than just the relief of tax benefits. It also helps build a corpus that you or your loved ones can dip into if the need arises.
More importantly, it gives your peace of mind that should anything happen to you, you can be assured that your family will be able to live the same lifestyle that they are used to, even when facing various life-stages.
You are young, have just tied the knot and are getting ready to start a new life together. While you may have already made plans on how to use the cash gifts you received - a trip to Bali, or the down payment on a new car – remember that you now are responsible for another person, and it always helps to be prepared. So, as you begin your new future, a planned life insurance policy becomes crucial.
For young parents
If you are a new parent, there is more joy all around. But it also means increased responsibilities. You have more than one life to care for, and this includes planning for your child’s future needs, with education and marriage being the biggest. And a life insurance policy can assure you that these can be taken care of when needed. To ensure that life’s smooth rhythm remains undisturbed no matter the situation, having a life insurance policy becomes a must.
For growing families
As your family grows and your children get older, newer requirements develop: a bigger flat, a bigger car, or even a holiday destination as per the kids’ choice. At times like these, a loan against your policy will always be a godsend.
Old age and retirement
A nest-egg for your twilight years is something you should not take lightly, regardless of how well-off you are while young. Fortunately, a life insurance policy helps build a corpus for your golden years even as it provides life cover. What makes it even better is that insurance policies can be so much more customised these days, depending on your individual needs and requirement.
Reasons for claim rejection
Your insurer can reject a life insurance claim on grounds of:
- Misrepresentation of actual information
- Non-disclosure of complete information
Apart from these, there are other grounds on which insurance companies can reject a claim you make. Here are some of them
Assuming you are 25 years old and take a whole life plan; you will receive a lumpsum payment at the age of 45. However, if you make a claim at 40 because of an emergency, your claim will not be entertained.
Every policy has an ‘in contestability period’, during which the insurer can dispute information provided in the application. For instance, your insurance company can refuse the claim if you said you were a non-smoker, but you turn out to be one.
Life insurance policies do not generally cover disability and critical illnesses, unless you buy disability and critical illness riders as well.
The money will be paid only to a trustee designated by you (the insured) and not to the spouse or child (the beneficiary) if he or she is under 18 years.
Some policies are only valid until the insured turns a certain age or for a certain number of years. The policy becomes invalid if you outlive this tenure.
Although suicide cases qualify for insurance pay outs, there is a catch. The insurance sector regulator, IRDAI, has made certain changes in the suicide clause with effect from January 1, 2014. Policies issued prior to this date will not be entertained under the old clause. As for those policies that have been taken out later, we’ll come to that a little later.
This is a common exclusion. Many policies do not cover accidental death in a war or during active military service.
People visiting designated ‘restricted countries’ or are vulnerable to violence, say Syria, beware: anything untoward in such places are usually not covered.
Sure, you have only one life to live and you should make the most of it. But partaking in extreme sports like skydiving, is not generally covered by an insurance policy. In fact, an insurer can reject a death claim if you were not wearing a helmet while riding a motorcycle (yup, it is a high-risk activity).
You cannot supersede the contract signed in a policy. So, if you have your wife’s name on the insurance policy as the beneficiary and you get divorced and remarry, your first wife will be entitled to the benefits in case something happens to you. You can avoid such a situation by updating the beneficiary name in your policy.
This is the most common ground for pay out refusal. If the premium is not paid within 30 days after the due date, the policy is considered lapsed.
Certain accidental deaths
Wondering why this is mentioned here when term plans provide coverage in case of death due to accidents? It is true that many term life plans have additional accidental death benefit riders that assure extra pay out on top of the basic sum assured in case of accidental deaths. However, there are exceptions
- Insurance companies will not entertain claims if you, the insured person, meets with an accident while driving or walking down a busy street and are under the influence of alcohol or any narcotics
- Loss of life while driving during a criminal act will also lead to claim rejection
- Life insurance plans exclude anything untoward that may happen during participation in adventure sports such as skydiving, parachuting, rafting, bungee-jumping
As mentioned above, according to IRDAI notification effective January 1, 2014, the beneficiary is eligible to receive 80% of the premium that has already been paid if the insured commits suicide within 12 months of policy commencement – this is for non-linked policies. For linked plans, the pay-out is 100%.
However, the policy will be considered terminated if the insured commits suicide after completion of a year of the policy
Bear in mind that some life insurance companies may not provide coverage for suicidal deaths. So, study the terms and conditions carefully, and understand the inclusions and exclusions before making your purchase.
Self-harming even with no intention of suicide gives the insurance company grounds to reject claims made by the beneficiary.
Insurance companies usually do not accept claims if the deceased was afflicted by sexually transmitted diseases (STD) such as HIV/AIDS.
Insurance companies will not release death benefits for the beneficiary if the insured person dies from an overdose of drugs or alcohol. It is quite common for insurers to put pay outs on hold until the autopsy report on unnatural deaths is released.
What happens if the insured person is murdered by the beneficiary? If investigations reveal that the nominee/beneficiary was involved in the crime, the insurance company will put the claim on hold– if not outright reject it– till the accused is cleared of the charges.
Different regions in India are vulnerable to different natural calamities such as floods, earthquakes, landslides, typhoons, and even tsunamis. If an accident happened due to any such natural calamity, the insurance company will not issue any death benefits. However, you can avoid this by adding a rider to the base plan to take care of the beneficiary in case of loss of life from such a calamity.
So, why should you have complete knowledge about inclusions and exclusions of your insurance?
- First, it will enable smoother claim processing;
- Second, it will help you avail of the maximum benefit from your policy.
More on Life Insurance
Sep 26, 2018 Everything You Need to Know About the Ayushman Bharat Health Insurance Scheme Read Time: 4 minutes
Oct 08, 2018 Aegon Life iTerm Plus Insurance Plan wins the 'Best Product Innovation' Award Read Time: 3 minutes
Aug 20, 2018 Term Insurance Vs Whole Life Insurance: Which is Better? Read Time: 5 minutes
Oct 09, 2018 Giving To Make A Difference Read Time: 2 minutes
Oct 24, 2018 Raising a child: Future financial planning, saving and investments Read Time: 4 minutes
Sep 29, 2018 Life Insurance Calculators – A Guardian to Your Family’s Financial Wellbeing Read Time: 3 minutes