Life insurance is a legal agreement between the insurance company and the applicant, wherein the insurance company promises to pay a lump sum amount of money to the beneficiary at the death of the insured or any other contingency mentioned in the agreement. The payout by the insurance company is made according to the conditions mentioned in the contract. In return, the insured pays a fixed amount of money called premium at regular intervals of time to the insurance company.
Goals fulfilled by Life Insurance Plans
When a person purchases a life insurance, he has various needs and requirements on his mind.
However, a life insurance plan basically fulfills three major goals of a person. They are:
Protection Goal: A life insurance offers protection either during the term chosen or the entire life. It
helps safeguard the financial future of the family on the untimely demise of the insured.
Investment Goal: A life Insurance provides lucrative plans for the applicant to invest money along
with getting an insurance. Through these plans, an applicant can gain interest on the investment.
Saving Goal: The insurance plan is a way to save money for various needs of life that can help
overcome the financial crisis of life, such as saving money for retirement or child’s education
Types of Life Insurance Policy
Various types of life insurance policies are available in the market that cater to different kinds of needs and future requirement of the applicants. Following is the list of various types of life insurance policy:
- Term insurance: It is one of the cheapest insurance plans available in the insurance industry. As per the plan, the insurance company pays a lump sum amount of money to the beneficiary at the death of the insured during the term of the plan. In return, the insured pays a premium to the insurance company. There is no survivor benefit in this plan. Many companies have included riders in this plan for extra benefits at some extra cost along with the premium.
- Whole life plan: This policy gives coverage for the whole life. Here the claim is sure to be made because the duration of coverage is the entire life, and the beneficiary is sure to get the lump sum amount at the death of the insured. The premium is expensive because death is certain and plan gives full risk claim.
- Endowment plan: This policy is a combination of protection as well as saving. Here the insurance company needs to pay the fixed amount either at the death of the insured or at the maturity of the policy. The usual duration for these policies is 10, 15 or 20 The premium charged is high. The policy amount can be with profit or without profit depending on the type of policy chosen.
- Money back plan: It is apt for people who want both protection for his family as well as some money during the policy to meet his need. In this policy, the insurance company pays a lump sum amount of money at the death of the insured and certain amount at certain intervals like 5 years and 10 years. The premium charged is high.
- Unit linked plan: This is protection as well earning through investment in the market. Here, the premium received by the insurance company is divided in two parts. The first part is sent to the pool of the insurance company for meeting the death claims. The second part is invested in the market as per the preference of the insured. The NAV is calculated everyday for these investments. At the time of death, the sum assured along with the invested amount of money on that day is given to the beneficiary. And if the plan matures then the decided amount of money along with the invested amount of money is given to the insured. Usually the premium amount in initial years are given more in the insurance pool then invested in the market.
- Retirement plan: This provides protection to both the family and the insured. We all need financial help in old age as the earning capacity in old age is zero. Retirement plan is to secure the old age of the insured. According to this plan one can start investing from very small age and accumulate an amount from where he would get annuity every month after a certain age. Otherwise a person can make a lump sum amount of single payment to the insurance company from where he would get monthly pensions.
- Child policy: With the increasing costs of the requirements of life, this policy can help safeguard the future of the child from his birth. This policy can provided a lump sum amount either for higher education or marriage. As per the policy, the child can get a certain amount of money once he/she attains a certain age.
How to purchase Life Insurance Policy
- One needs to understand the purpose behind taking life insurance – only protection or saving and investment as well. Then one needs to analyze the needs and requirement of self and the family members.
- It is time to understand the various plans available in the market. One can do this either online or consult some agent. Then it’s important to compare the plans on the basis of various parameters.
- One needs to finalize the amount of the sum assured and the duration of the policy. One needs to understand the importance of the riders in view of the condition of the self and family. Mode of payment is also to be decided.
- The next step is filling up the prospectus of the policy. This document is very important. It has various questions which need to be answered by the applicant, as this helps the company in deciding the premium amount.
- Once the document is received by the insurance company, it conveys the amount of premium that would be charged and the last date by which the payment needs to be made.
- The applicant then needs to make the payment according to the selected mode of payment.
- On the receipt of the payment, the insurance company issues the policy document along with the payment receipt.
- It is the duty of the insured to make the payment before the due date and keep the receipts with him.
Best Life Insurance Plans in India in 2019-20
|Life Insurance Plans||Entry Age (Min/Max)||Policy Term (Min/Max)||Sum Assured (Min/Max)|
|Aegon Life iTerm Plan||18/75 years||5/40 years||10 Lakh/NA|
|Aviva I-Life Plan||18/55 years||10/35 years||25 Lakh/NA|
|Bajaj AllianziSecure||18/70 years||10/30 years||20 Lakh/NA|
|Bharti AXA eProtect Term Plan||18/75 years||10/30 years||25 Lakh/NA|
|HDFC Click2Protect Plus||18 /65 years||10/30 years||10 Lakh/10 Crore|
|HDFC Life Sanchay||30/45 years||15/25 years||1,05,673/NA|
|HDFC SL Crest||14/55 years||10/10 years||(7 or 10) x Annual Premium/20 x Annual Premium|
|ICICI Pru iProtect||20/75 years||10/30 years||3 Lakh/NA|
|Kotak Life Preferred e-Term||18/75 years||10/40 years||25 Lakh/NA|
|LIC AmulyaJeevan||18/60 years||5/35 years||25 Lakh/NA|
|LIC New JeevanAnand||18/50 years||15/50 years||1 Lakh/NA|
|LIC Term Plan||18/75 years||10/35 years||50 Lakh/NA|
|Max Life Online Term Plan||18/70 years||10/35 years||25 Lakh/100 Crore|
|SBI eShield Plan||18/70 years||5/30 years||20 Lakh/NA|
|SBI ShubhNivesh Plan||18/60 years||5/30 years||75,000/NA|
Some of the Life Insurance Companies in India
- Life Insurance Corporation of India (LIC)
- ICICI Prudential Life Insurance
- SBI Life Insurance
- HDFC Standard Life Insurance
- Max Life Insurance
- Bajaj Allianz Life Insurance
- Birla Sun Life Insurance
- Reliance Nippon Life Insurance
- TATA AIA Life Insurance
- PNB Metlife India Insurance
Terms used in Insurance Industry
- Annuity: It is an insurance contract which provides income or pension after a certain period of time depending on the terms and conditions of the contract.
- Death Claim: It is the lump-sum amount paid to the nominee or the beneficiary of the policy on the death of the insured.
- Beneficiary: Person or legal entity who would receive the death benefit of the policy.
- Life assured/insured: Person whose life is insured under the policy.
- Policyholder: Person holding the policy. The person may and may not be the life insured.
- Maturity benefit: It is the survivor benefit. The money that the policyholder receives at the maturity of the policy, if the insured survives the term period.
- Nominee: Person appointed by policyholder to receive financial benefits of the policy.
- Premium: Amount that policyholder pays to the insurance company to keep the policy active till the maturity of the policy or death of the insured, whichever is earlier.
- Rider: Additional financial benefits offered by insurance companies to policyholders along with the coverage. These riders are chargeable along with the premium amount.
- Charges on Surrender or discontinuation of policy by the policy holder: Charges deducted from the total premium amount received from the policy holder till date, if the policy holder decides to surrender the policy.
- Surrender value: Amount received by the policyholder if he decides to discontinue the policy before the expiry of the policy. It is the total premium paid till date minus the surrender charges.
- Survival benefit: Money received by the policyholder, if the insured survives the term period of the policy.