Life insurance is something which people normally seek to cover them from the unpredictable loss in the future. Many people do not still realize the importance of life insurance. One of the reasons for this is lack of understanding of the finer aspects of Life insurance. Following are few of the tips which would help while looking for an insurance policy.
Broadly life insurance policies are divided into, Term life insurance and investment life insurance plans:
Term life insurance- Term life insurance, also known as a pure protection plan is one of the most basic forms of insurance policy. It covers the life of the Policy holder and the sum Assured is paid to the Beneficiary after the death of the insured. It is the cheapest and most essentilal insurance.
Investment life insurance plans – Investment plans combine the benefits of life insurance with investments. Two major categories of such plans are Traditional Plan and unit linked insurance plans. The traditional plan involves endowment policies and money back policies which provide guaranteed returns. Unit linked insurance plans (ULIPS) are market linked investment plans.
Although a new concept in terms of whole life insurance is also emerging in India. The major difference between whole life insurance and Term Insurance is that the policy holder pays the Premium until his death or hundred years of age.
1.Knowing the insurer – In order to seek insurance one must conduct a research before finalizing an insurance policy and an insurance company. It is wise to find out whether the company is registered and is reputable.
2.Choosing the right policy – There are various kinds of policies which suit different people according to their need and requirement. If you are not too sure of such policies then it is advisable to contact a financial advisor.
3.Policy Coverage & Benefits – Policy coverage differs as per the type of life insurance and the insurance company.
•Under Term Insurance Plans:
Term plans provide the life cover to the Policyholder up to the fixed term as defined by the policy holder say 5year, 10 year or 20year. In case the policy holder dies within the term; the Sum Assured is paid to the beneficiary
•Under Investment Insurance Plans:
In traditional Plans, at the time of maturity, the policyholder gets Maturity amount plus the accrued or guaranteed bonus. In case of untimely demise of policy holder, the sum assured along with the bonuses is paid to the beneficiary.
In ULIP, value of fund units along with bonuses is paid at the time of maturity and in case of death, the higher of the sum assured or fund value is paid to the beneficiary.
If you have opted for Riders like accidental Death Benefit or Waiver of premium or any other offered by the insurance company, the claim settlement is made in light of that rider.
What Is NOT Covered
Mostly all the causes of death are covered provided they are natural causes. There might be some exclusion like:
•Generally, Death by suicide is covered after an exclusion of 2 years of continued life insurance.
•Death due to war, of the military personnel is covered only if the rightful declarations have been made and for civilians, it depends on the government ruling at that time
•Death due to adventure sports etc. is covered only if the due declarations have been made at the time of filling the Proposal form.
In order to reap the full benefit of a life insurance policy
it is best to understand the risks and benefits of the policy before starting to pay a premium.