What is life insurance?
Life insurance is a financial contract where an individual pays regular premiums to an insurance company in exchange for a sum of money (death benefit) to be paid to their beneficiaries upon their death. It provides financial security and support to loved ones in the event of the policyholder's passing, helping cover expenses like funeral costs, debts, and living expenses. Life insurance comes in various forms, including term life, whole life, and universal life policies, offering different features and benefits to policyholders.
How does life insurance work?
Here’s how a life insurance policy works:
- Purchase policy: Individuals first need to buy the life insurance policy.
- Pay premiums: The insured needs to pay regular premiums to the insurer.
- Risk assessment: Insurer evaluates factors like age, health, and lifestyle.
- Activate policy: Approved policy becomes active, offering coverage.
- Policyholder's demise: If the policyholder dies, beneficiaries file a claim.
- Claim approval: Valid claims are processed by the insurer.
- Beneficiary payout: Tax-free death benefit is paid to beneficiaries.
Key features and benefits of Life Insurance policies
Secure your family’s future
Ensure financial protection for your family in case of your untimely demise through plans offering whole life coverage.
Get assured income benefits
Get income benefits after policy maturity either as lump sum or in the form of monthly payouts.
Enjoy flexible premium payment options
You can choose from higher or lower premium payment options and flexible cash value components, as per your convenience.
Get extensive critical illness coverage
Along with life cover, get coverage for medical expenses incurred for up to 55 chronic and terminal illnesses.
Get return of premium benefit
If no claim is made during the policy tenure, you will receive the total premiums paid towards the policy at maturity.
Enhance policy coverage with add-ons
Opt for add-on coverage to enhance the coverage of the policy. Get Critical Illness cover and Accidental Death Benefit. You can add Accidental Total Permanent Disability Benefit, and Waiver of Premium Benefit riders as well.
Get tax benefits
Get tax exemptions on premiums paid for life insurance policies as per the provisions of the applicable Income Tax laws.
Types of life insurance
Life insurance is an integral part of financial planning and provides protection and peace of mind for individuals and their loved ones. There are several types of life insurance policies available in the market, each with its own unique features and benefits. Here are some of the most common types of life insurance policies:
1. Term life insurance
It provides coverage for a specific period of time. Generally, the most affordable type of life insurance.
2. Whole life insurance
It provides coverage for the policyholder's entire lifetime. It also offers an investment component, growing cash value over time.
3. Universal life insurance
It offers flexible coverage and premium payment options, and also allows for potential cash value accumulation.
4. Variable life insurance
Similar to whole life insurance, but policyholders have the option to invest their premiums in various investment instruments.
Who needs life insurance?
- Parents: Ensure financial security for children's upbringing, education, and future.
- Spouses: Protect surviving partner from financial strain upon the other's death.
- Debt holders: Cover outstanding loans or mortgages to prevent burdening family with debt.
- Business owners: Secure business continuity and buy-sell agreements, ensuring a smooth transition.
- Single individuals: Cover end-of-life expenses and potentially leave a legacy or charitable donation.
- Elderly parents: Provide for dependent parents' care and expenses, easing their financial burden.
Factors that affect life insurance premium
- Age: Age is a key determinant. Premiums tend to increase as you get older since mortality risk rises with age. Younger individuals typically pay lower premiums.
- Health: Your health status significantly influences premiums. Better health often results in lower premiums, while pre-existing medical conditions or unhealthy habits can lead to higher costs.
- Coverage amount: The amount of coverage you choose directly affects premiums. Higher coverage means higher premiums because it represents a greater financial risk for the insurer.
- Policy type: The type of policy you select, such as term life or whole life, impacts premiums. Permanent policies like whole life usually have higher premiums than term policies.
- Lifestyle: Risky behaviors like smoking or dangerous hobbies can increase premiums due to higher mortality risk associated with these activities.
These factors collectively determine your life insurance premium, emphasizing the importance of considering them when purchasing coverage tailored to your financial needs and circumstances.
Points to consider before buying life insurance policy
Here are some points to keep in mind:
- Assess your needs and determine how much coverage you require.
- Consider the type of policy that best fits your needs and budget.
- Evaluate the financial strength and reputation of the insurance company.
- Review policy terms and conditions, including exclusions and premium payment options.
- Understand the policy's riders and add-ons that can provide additional coverage.
- Compare policies and rates from different insurance providers.
- Check if you qualify for any discounts or incentives.
- Disclose all pertinent information about your health and lifestyle to the insurance provider honestly.
By considering these key points, you can select the most appropriate life insurance policy that meets your needs and goals, ensuring the financial security of your loved ones in the future.
A step-by-step guide to buying Life Insurance plans on Bajaj Finance Insurance Mall
Click here to visit our online application form.
Enter the required details – name, mobile number, email ID, DOB, and gender. Click on ‘Proceed’ button.
Share a few more details related to your lifestyle, occupation, education, income, and PIN code. Click on ‘View Plans’ button.
You will see the plans available. Click on ‘Buy Now’ on the plan and our representative will call you back and explain the products available for you to take an informed decision.
Frequently asked questions
In the event of the policyholder's passing or after the term has ended, a life insurance policy pays the beneficiary or the nominee. The nominee can file a claim for death coverage with the insurer to receive the policy's insured amount. At the end of the policy tenure, a policyholder can renew the policy, or receive a maturity benefit.
There are different types of life insurance policies. Some of them are term insurance, whole life insurance, endowment plans, money-back plans, and retirement plans.
A life insurance plan gives you financial coverage for a secure future. This policy provides death coverage. You get the flexibility to choose the term. You can get a loan against your plan in case of a financial emergency. This policy also offers you the opportunity to create wealth.
You may be eligible for tax exemptions for life insurance premiums. Please check the relevant sections of the Income Tax Act of 1961.
When you have whole life cover, you are protected for the whole of your life, or however long you live. Under this plan, you pay a premium for the first 10 to 15 years and be eligible for coverage up to age 99.
The amount the policyholder receives if he cancels or surrenders the policy before maturity is known as the surrender value. It is the sum that the policyholder will get from the life insurance provider if he decides to discontinue the policy before maturity. This is only applicable if the policyholder has paid premiums for the policy for 3 consecutive years.