1. What is Life Insurance?
Life insurance is a legal agreement between you and the Insurance Company to secure your Family’s future in case of your untimely demise. It provides with a pre-determined amount to the beneficiary during the contract period.
The primary purpose of Life Insurance is the protection of your entire family in case of your death. Now a day’s Life insurance also acts as a tool to plan effectively about your future Savings, your child’s education needs etc. So apart from covering your life, it is an effective tool to augment your wealth
2. What is IRDA?
IRDA is Insurance Regulatory Development Authority, that has been set up to protect the interests of the policy holders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.
3. Who is a beneficiary?
Beneficiary is the person who will be paid off any benefits through your Life Insurance policy.
4. How is my premium on life insurance calculated?
The life insurance premiums is primarily based on four factors-
• Age & health of the policyholder.
• Term of the policy.
• Amount assured.
5. Why do I need life insurance?
Life Insurance provides for financial security in the event of death or on the inability to earn due to physical disabilities. Besides providing for financial security in the case of one's untimely death, it can be used to accumulate a kitty for your old age, systematically build assets, for funding your child's education and also for saving on taxes.
6. What is a Whole Life policy?
Whole Life is the policy where benefits are payable only on the death of the policy holder within the term, you have to pay a fixed premium depending upon your age & other factors, you also earn interest on the policy’s cash value as the years roll by and your beneficiary gets a fixed amount at the time of your death. It provides permanent protection by accumulating cash values that can be used during emergency. Moreover the Surrender value provides you an extra source of retirement money.
7. What is an Endowment Policy?
Endowment Policy provides with an Insurance coverage and at the same time acts as a Savings instrument, a plan where the benefits are paid on death within the term or at the time of maturity of the policy whichever is earlier. Unlike Whole life it is a policy designed principally for providing Living benefit. Thus it is more of an Investment policy and premium for an endowment life policy is much higher than that of a whole life policy
8. What is Money back policy?
Under Money back policy, survival benefits are spread over the term of the policy i.e. certain percentage of sum assured is paid at regular intervals before the maturity date. Full sum assured is payable on death within the term irrespective of earlier survival benefits i.e. even after payment of survival benefits the risk cover on the life continues for the full sum assured and bonus is also calculated on the full sum assured. If the policyholder survives till the end of the policy term, the survival benefits are deducted from the maturity value.
9. What is an annuity Scheme?
An Annuity scheme is an investment wherein you have to make regular contributions over a period of time either in a single lump sum or through installments made over a certain number of years which yields a regular income until death starting from your desired retirement age. In some annuity schemes upon the death of the annuitant, or at the expiry of the period, the invested annuity fund is refunded usually along with a small bonus to the survivors. In nutshell the Annuities offer a guaranteed income for a certain period or for life and are bought to generate income during your retired life and are also called Pension Plans.
10. What are Joint Life Policies?
Joint Life policies are similar to Endowment Policies but are categorized as they cover two lives simultaneously, thus offering a unique advantage in some cases, notably, for a married couple or for partners in a business firm.
11. What are the Tax benefits of insurance policy?
Following are the tax benefit in an insurance policy
- Under Sec.80C of the Income Tax Act, Premiums paid up to maximum of Rs.1,00,000/-, subject to maximum of 20% of Sum Assured ,to effect or keep in force an insurance on the life of the individual, the spouse and any child of the individual.
- Under Sec.80CCC of the Income Tax Act, Premiums paid up to maximum of Rs. 1,00,000/- to effect or keep in force a contract of annuity plan for receiving pension.
- However, u/s.80 CCE, the aggregate amount of deduction under section 80C, section 80CCC, and section 80CCD shall not, in any case exceed Rs. 1 lakh
- Under Sec.80 D of the Income Tax Act, Premiums paid (other than through cash) towards Critical Illness Rider, subject to a total maximum of Rs.15,000/- (an additional Rs 5,000 for senior citizens) to effect or keep in force an insurance on the health of the individual, spouse and dependent parents or children.
- Maturity Benefits are exempted Under Sec.10 (10D) of the Income Tax Act, Maturity benefits are tax free. However in cases where premium exceeds 20% of Sum assured in any year, benefits paid in excess of premiums paid will be taxable.
12. What is nomination?
Nomination is a right conferred on the life insurance policyholder to appoint a person or persons to receive the policy monies in the event of the policy becoming a claim by death. Any policyholder, who is a major and the life insured under a policy, can make a nomination.
13. Who is a nominee?
A nominee is the person designated by the policyholder to receive the proceeds of an insurance policy, upon the death of the insured.
14. Can one change His/her nomination?
Yes. One can change your nomination at any time till the maturity date. All you need to do is to inform the insurance company about the change through the specified form.
15. What are Survival Benefits?
These Benefits are there in some policies where a part of the sum assured is paid to you (policyholder) at fixed intervals before the maturity date. The risk cover for Life is continued for the full sum assured even after payment of survival benefits and if the policyholder survives till the end of the term, these benefits are deducted from the Maturity value.
16. What is Bonus?
Insurance Company distributes its profits to its Policyholders every year in the form of a Bonus, it is declared as a certain amount per thousand of sum assured. Bonuses are credited to the policyholder’s account and paid at the time of maturity
17. What are With Profit and Without Profit Plans?
With Profit Plans are those where bonus declared is allotted to the policy and is paid at the time of maturity/death. The Without Profit Plans are those where the contracted amount is paid without any profit share, therefore the premium rate for With Profit Plan is higher than the Without Profit Plan.
18. What are guaranteed additions?
In some policies Bonuses/Profits are guaranteed declared as a certain amount per thousand of sum assured and are payable at the end of the term or early death of the Policy holder.
19. What are Disability Benefits?
These are those Benefits which are given to the insured in case he becomes totally and permanently disabled due to any accident where he need not pay future payments and the policy shall continue for the full sum assured.
20. What are riders?
Riders are additional benefits that can be attached onto your basic life insurance policy. These riders give you the benefit of increasing your risk cover in case of certain events happening. For instance if you have taken an Accident Death Benefit rider and you die due to an accident then your beneficiaries can get up to a maximum of twice the basic sum assured.
21. What is meant by Double Accident Benefit?
It is that benefit where payment of double the amount of designated benefit is made if the Policyholder is died due to certain kind of accident, also called Double Indemnity.
22. Are there any advantages in buying insurance at an early age?
Yes. The premium that you pay on your insurance policy is mainly dependent upon two things - your age and the tenure of the policy. The younger you are, the lower is your insurance premium amount. . At younger age, you would be physically sound and may not be suffering from illnesses/ medical. This would entitle you to a lower premium on the policy. Therefore it is advisable to buy insurance at an early age to reduce the cost of insurance.
23. What is Salary Savings Scheme?
It is that scheme where the premium is paid from the employee’s salary through monthly deductions by the employer & there will be waiver of 5%, the additional charge of the premium which is added usually for the monthly mode of payment.
24. What is Surrender Value?
It is that value which is payable by the insurer whenever he desires to terminate the contract before the expiry of the Policy term. The insured can surrender the policy if the policy is kept in force for 3 years and Bonus is also added to that value if the policy has been there for at least 5 years.
25. When is policy lapsed?
The Policy lapses, when you don’t pay the premium within the grace period provided after the due date
26. What is a Death Claim?
It is the claim payable at the time of death to the nominee or any legal successor, if no person is nominated by the insured or no will is made, the claim is paid to the holder of a Succession Certificate
27. What will I receive on maturity of my policy?
On maturity, you will receive the sum assured or the Accumulation Account whichever is higher. Let’s understand how does this work,
· Every year you will pay premium on your policy.
· This premium will get credited to an Accumulation Account.
· The amount required towards your life cover expenses and any other expense would be deducted from this Account.
· The balance will be invested in sound financial securities (as per IRDA regulations) on your behalf.
· The bonuses declared each year by the company would be added to the Accumulation Account. Thus, every year the value in your Accumulation Account will get compounded.
· At the end of the policy tenure, you would receive the amount in the Accumulation Account or the sum assured, whichever is higher.
28. Who is entitled to receive the Claim benefit?
The nominee or appointee (in case of minor nominee) last recorded under the Policy in case of Policy on own life.
· The proposer in case the Policy is not on own life.
· Assignee in case the Policy was assigned.
· Life Assured himself in case of policy on own life for living benefit claims.