All You have to know about Life Insurance

By Insurance Regulatory and Development Authority,

Life Insurance is a financial cover for a contingency linked with human life, like death, disability, accident, retirement etc. Human life is subject to risks of death and disability due to natural and accidental causes. When human life is lost or a person is disabled permanently or temporarily, there is loss of income to the household.
• Though human life cannot be valued, a monetary sum could be determined based on the loss of income in future years. Hence, in life insurance, the Sum Assured ( or the amount guaranteed to be paid in the event of a loss) is by way of a ‘benefit’. Life Insurance products provide a definite amount of money in case the life insured dies during the term of the policy or becomes disabled on account of an accident.
• Why you should buy Life Insurance: All of us face the following risks: Dying too soon Living too long Life Insurance is needed : To ensure that your immediate family has some financial support in the event of your demise To finance your children’s education and other needs To have a savings plan for the future so that you have a constant source of income after retirement To ensure that you have extra income when your earnings are reduced due to serious illness or accident To provide for other financial contingencies and life style requirements

• Who needs Life Insurance: Primarily, anyone who has a family to support and is an income earner needs Life Insurance. In view of the economic value of their contribution to the family, housewives too need life insurance cover. Even children can be considered for life insurance in view of their future income potential being at risk.

• How much Life Insurance is needed: The amount of Life Insurance coverage you need will depend on many factors such as: How many dependents you have Whether you have any debts or mortgages What kind of lifestyle you want to provide for your family How much you need for your children’s education What your investment needs are What your affordability is You should seek the help of an insurance agent or broker to understand your insurance needs and suggest the right type of cover.

Whole Life Insurance With whole life insurance, you are guaranteed lifelong protection. Whole life insurance pays out a death benefit so you can be assured that your family is protected against financial loss that can happen after your death. It is also an ideal way of creating an estate for your heirs as an inheritance.

Endowment Policy An Endowment Policy is a savings linked insurance policy with a specific maturity date. Should an unfortunate event by way of death or disability occur to you during the period, the Sum Assured will be paid to your beneficiaries. On your surviving the term, the maturity proceeds on the policy become payable.

Money back plans or cash back plans: Under this plan, certain percent of the sum assured is returned to the insured person periodically as survival benefit. On the expiry of the term, the balance amount is paid as maturity value. The life risk may be covered for the full sum assured during the term of the policy irrespective of the survival benefits paid.
Children Policies These types of policies are taken on the life of the parent/children for the benefit of the child. By such policy the parent can plan to get funds when the child attains various stages in life. Some insurers offer waiver of premiums in case of unfortunate death of the parent/proposer during the term of the policy.

Annuity (Pension) Plans When an employee retires he no longer gets his salary while his need for a regular income continues. Retirement benefits like Provident Fund and gratuity are paid in lump sum which are often spent too quickly or not invested prudently with the result that the employee finds himself without regular income in his post – retirement days. Pension is therefore an ideal method of retirement provision because the benefit is in the form of regular income. It is wise to provide for old age, when we have regular income during our earning period to take care of rainy days. Financial independence during old age is a must for everybody.