Growing up and becoming an adult means shouldering increasing responsibilities, a large chunk of which are financial obligations. Sooner or later, we realize that having a sound financial plan is important and that life insurance should be a key element of that plan. Why? For the simple reason that life is uncertain. To protect your family and loved ones against the contingencies linked with human life, like death, disability, accident, etc. and for retirement planning, life insurance acts as an effective cover in such instances of loss of income. We all face the risk of dying too soon or living too long, and in either case, life insurance plans provide a financial cushion to fall back on.
Sure, you cannot place a figure on the cost of a human life and the impact of its loss, but life insurance can help prevent financial crises in such times. Life insurance acts as a contract to provide the beneficiaries of the policyholder with a pre-decided sum assured in the unfortunate event of the latter’s demise, accident or disability. There is a comfort in knowing that you can still provide for your family even in your absence.
However, the world of insurance policies can be confusing and replete with jargon. It can be hard to understand the nitty-gritties so here we answer the questions and apprehensions most frequently expressed by anyone contemplating about getting a life insurance plan.
What is Life Insurance premium?
A life insurance premium is, in simple terms, the cost of the insurance policy. It is the specified sum of money that the policyholder pays for the insurance policy. It depends on a variety of factors like age, gender, family history, smoking habits, occupation etc.
How much life insurance coverage do I need and when should I buy a policy?
The life insurance coverage should be sufficient enough to provide for the family and dependents, to enable them to maintain the same lifestyle and meet financial goals without compromising on their dreams. As such, an insurance cover of 20 to 25 times the annual income makes for a good ballpark figure.
The amount will also be influenced by the level of lifestyle you are currently operating at, what your investment needs are and what you can afford within your disposable income. Additionally, you should make room for any future needs like children’s education, their wedding etc that you anticipate.
It is advisable to buy a life insurance plan as soon as possible because age can be a determining factor in the amount of premium needed to be paid. As a younger policyholder, you will pay lower premiums than you would at a later age. This is because as you age, the likelihood of having to pay the policy increases, not to mention the health risks and issues magnify with age. This translates into higher premiums.
What are the different types of life insurance plans?
- There are five unique types of life insurance plans:
- Term Life Insurance is a pure insurance product, with no investment component. They offer a larger life cover for a nominal amount but carry no maturity benefit like the Future Generali Express Term Life Plan that gives you the flexibility to choose policy and premium terms.
- Endowment Plans, in addition to offering a lump sum amount at the end of the chosen tenure, also provide life cover till the maturity of the plan.
- As the name suggests, Money Back Plans provide pay-outs at regular intervals, calculated as a percentage of the sum assured under the plan.
- Unit Linked Investment Plans or ULIPs are life insurance plans which offer market linked returns, thereby exposing you to the investment side.
- Annuity/Pension Plans are much like the Money back plans, except that they help you with a regular income post retirement. Under a deferred annuity plan, regular income is disbursed after a few years of the deferment period, and in an immediate annuity, the regular income flows in immediately once the plan is operational.
What are Riders in Life Insurance?
Riders are optional, additional benefits that can be included in the basic life insurance plan to provide additional insurance coverage for a nominal premium. Future Generali Life Insurance offers the following types of riders with the life insurance plans:
Accidental Death rider
Accidental Total & Permanent Disability Rider
Are there tax benefits if I take life insurance?
Yes, there are. Life insurance tax benefits extend to both the premiums and the maturity amount. You can avail tax benefits on premiums paid for a life insurance policy as a tax deduction under Section 80C of the Income Tax Act, 1961, which allows exemption up to Rs.1.5 lakh per annum. The sum assured received us also completely tax exempt under Section 10(10D) of the Income Tax Act.
