What is Life Insurance?
Life Insurance is the key to good financial planning. On one hand, it safeguards your money and on the other, ensures its growth, thus providing you with complete financial well being.Life Insurance can be termed as an agreement between the policy owner and the insurer, where the insurer for a consideration agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness, critical illness or maturity of the policy.
Life insurance plans, unlike mutual funds, are beneficial when you look at them as a long term avenue of investment which also offers protection through life cover. Life insurance policies are broadly categorized into 2 types; Traditional Plans and Unit Linked Insurance Plans (ULIPs).
Traditional policies offer in-built guarantees and define maturity benefits through variety of products such as guaranteed maturity value. The investment risk in traditional life insurance policies is borne by life insurance companies. Additionally, the investment decisions are regulated to a large extent by IRDA rules and regulations, ensuring stable returns with minimal risk. Investment income is distributed amongst the policy holders through annual bonus. These policies are ideal for policy holders who are not market savvy and do not wish to take investment risks.
Life Insurance serves dual purpose - not only it provides financial protections to the family members in case of premature death of earning member but also provides long term saving for your financial and retirement plan.
Life insurance policy is a contract typically between an individual (called the insured) and the insurance company (called the insurer), where the insurance company promises to pay a sum of money to the insured's nominee, in the event of the insured's death.
Risk free Investment option
Ideal Advantage :
Better Understanding of your needs
High cover at low premiums
Better Fund Management
A dedicated team to handle your Claims
Timely Reminders and collection of Renewals
Why Life Insurance
Risk Cover – It is the most important aspect of Life Insurance. Unfortunately, most of us are not aware about our need for Life Cover resulting in hardships for the entire family in case of a sudden demise of the earning member. Risk cover should be the first priority followed by other benefits like Tax Saving and Investments.
Tax saving – It’s a crucial aspect of Life Insurance. Premium paid is exempt under sec 80 © and claims or maturity benefits are also completely tax free under sec 10 (10) D. For further details, please contact our Risk Managers
(10) D. For further details, please contact our Risk Managers.Savings – Life Insurance generates long term capital as against other tools of investment which are mostly short term oriented. It helps you better plan and achieve your long term financial goals
How to Plan
Don't buy insurance just because your neighbour bought it. Buy insurance because you need it.
Here are a few points to ponder about, whilst going about fulfilling your needs.
What kind of insurance do I need?
Understand your financial goals. Once you know what your aim is, you will be in a better position to choose the type of insurance you need - protection, savings, investment or retirement.
What will my insurance policy cover?
Different insurance policies have different covers. Make sure your financial advisor presents you with a list of recommendations, including the types of policies and benefits. Read them thoroughly to be aware of what your policy covers.
How much insurance coverage do I need?
The amount of insurance coverage you need depends on factors such as the number of dependants, debts or mortgages, lifestyle and investment needs. Insurance cover should be to such an extent that in case of one's demise, his / her dependents are able to maintain the same lifestyle as they used to have before the unfortunate event occurred.
How much will I be paying for my insurance cover and will I be able to afford the premiums over the long term?
The amount of premium paid depends on the insurance cover you buy. Look at the current benefits your insurance policy provides and opt for a rider accordingly. With some riders, you may stop paying premiums for your policy if you become disabled, but will still be able to enjoy the benefits of life insurance protection.
Frequency of Premium Payment:-
Choice of Frequency of premium payment period - Single premium, Yearly, Half yearly, quarterly and monthly should be carefully exercised. However, if your policy does not have this benefit and you are finding it difficult to continue meeting the premium payments, consult your financial advisor.
Modes of payment
Note- While exercising the choice for frequency of premium payment and mode of payment ,please ensure that you mark the appropriate column in the proposal form
What happens if I fail to make the required premium payments?
Typically there is a grace period (15 to 30 days) during which you can pay the premium with no interest charged. If you do not pay your premium within this grace period, your policy lapses as a matter of general rule. However the discontinuation of policy is governed by the policy conditions which may differ from insurer to insurer and plan to plan.
Should I replace an existing insurance policy?
An insurance policy is a long-term commitment and any decision to cancel a policy should only be taken after careful consideration. Early cancellation of a policy may incur additional fees and charges. More importantly, you could lose out on valuable benefits. If you are unable to continue paying premiums on your current policy, you should consult your financial advisor on the options that are available. If you decide to replace your current policy with a new one, we would recommend that you do not cancel your original policy until you receive confirmation that your new policy is in force. This will ensure that you are not left without coverage during the interim period.
What is Unit linked polices ?
Unit Linked Plans offer unique opportunity to combine protection with investments. Some special features of Unit Linked Life Insurance Policies (ULIPs) are:
Provides flexibility in investments
ULIPs offer a complete selection of high, medium and low risk investment options under the same policy. You can choose an appropriate policy according to your risk taking appetite, coupled with the opportunity to switch between fund options without any additional expense for specified number of switches. ULIPs provide the flexibility to choose the sum assured and investment ratio in the annual targeted premium. It also offers the flexibility of one time increase in investment portfolio, through top-ups to avail investment opportunity offered by external environment or own income flows.
The charge structure, value of investment and expected IRR based on 6% and 10% rate of returns, for the complete tenure of the policy are shared with you before you buy a product. Similarly, the annual account statement, quarterly investment portfolio and daily NAV reporting, ensures that you are aware of the status of your investment portfolio at all times. Most companies publish latest NAVs on their respective websites on a daily basis.
To cope with unforeseen circumstances, ULIPs offer the benefit of partial withdrawal; wherein after 5 years you can withdraw funds from our Unit Linked account, retaining only the stipulated minimum amount.
Disciplined and regular savings
ULIPs help you inculcate a regular saving habit. Also, the average unit costs tend to be lower than one time investment.
Multiple benefits bundled in one product
ULIP is an outstanding solution for risk cover, long term investments with the benefit of various investment opportunities, coupled with tax benefits.
Spread of risk
ULIPS are ideal for those investors who wish to avail the benefit of market linked growth without actually participating in the stock market, with the added benefit of risk-cover.
The major charges levied in ULIP Plans are:
1. Allocation charges
2. Policy Administrative Charges
3. Surrender Charges
4. Mortality Charges
5. Fund Management Charges
6. Guarantee Charge
7. Discontinuance Charge
8. Miscellaneous Charges
9. Switching Charges