Uncovering the Top Life Insurance Questions and Providing Straightforward Answers

Life, like life insurance, is not a one-size-fits-all proposition.

Making future plans may be both thrilling and terrifying. When purchasing your first insurance policy or making plans for the next chapter of your legacy, it’s normal to have questions. You may have quite a few questions in your head regarding the same.

This article briefly discusses the top 10 questions about life insurance policies that you might have if you’re considering purchasing one and want to know what a life insurance policy covers.

What fundamental components make up a life insurance policy?

Let’s start by defining the concept at hand. What is life insurance? It is an agreement whereby the life insurance company pays out a specific lump sum amount or the sum assured to the nominees of policyholders in case of their demise within the policy tenure. To keep the policy in force, one has to pay the premium for the same. An individual’s age and many other factors impact the premium amount, along with medical history, income and employment, and so on. At the same time, some life insurance plans often come with maturity benefits.

What kinds of life insurance are there?

Before deciding to purchase a policy, you should be aware of the basic types of life insurance.

• Term Life Insurance: For a small premium, this policy guarantees a sizable amount to your loved ones in case of your demise within the policy period. This, however, lacks any maturity value.
• Endowment Plans: This type of plan offers a lump sum payment after the conclusion of the tenure. Along with this maturity benefit, it also ensures seamless life coverage throughout the policy term.
• Money Back Plans: These allow you to receive payments regularly (usually for 5 to 10 years). These payouts represent a specific portion of the amount guaranteed by the plan.
• Unit-Linked Investment Plans: ULIPs help you invest in market-linked funds to earn returns over a specific duration while staying insured simultaneously. They come with higher market risks and sizable rewards in the long haul.
• Pension/Annuity Plans With Life Cover: These are popular among investors who want to benefit after retirement when there is no steady source of income and expenses are frequently on the rise. Both deferred and urgent plans are available. After a few years, you begin getting a regular income from a delayed annuity plan. On the other hand, immediate annuity plans give you a consistent income as soon as you buy the plan.

What distinguishes term insurance from life insurance?

The main distinction between traditional life insurance and term insurance is that term insurance covers the policyholder for a specific duration, but life insurance provides coverage for the whole life. Furthermore, traditional life insurance delivers death and maturity benefits to the insured. In contrast, term insurance only offers a death payout in the event of the insured person’s demise within the plan’s tenure.

What are the main advantages of having life insurance?

• If you pass away within the policy’s tenure, then the sum assured will be paid out to your nominees
• You can choose the frequency of premium payments, i.e., monthly, quarterly, annually, and so on
• There are many life insurance plans which combine investments and insurance. With endowment plans, you get maturity benefits, while ULIPs can give you good investment returns.
• Life insurance premiums will give you handsome tax deductions of up to ₹ 1,50,000 under Section 80C of the Income Tax Act. The maturity or death benefit payouts are exempt from taxation under Section 10D.
• You can add relevant riders to your life insurance policy to cover unforeseen scenarios
• If you add a critical illness rider or any similar option to your term plan, you can get tax deductions up to Rs. 25,000 under Section 80D

What do “riders” signify in a life insurance policy?

Riders are supplemental top-up features that extend the coverage and benefits of a life insurance policy. You can select riders like the accidental death benefit rider and the accidental permanent disability benefit rider, for instance, in addition to life insurance.

Can my life insurance plan provide me with tax advantages?

The tax advantages that life insurance plans offer are an important reason for their acceptability and popularity. Section 80C allows for the tax exemption of life insurance premium payments. This is one of the most important advantages of life insurance since it enables a policyholder to get a maximum benefit of up to Rs 1.5 lakh annually under this section.

What do you mean by underwriters in a life insurance policy?

Underwriters assess the risk associated with insurance. Only after the underwriters’ approval can the policy be issued to the policyholder. The risk evaluation process begins before the insurance policy issuance and finishes with the settlement of the claim. Additionally, the firm only pays the nominee’s claim payout after receiving approval from the underwriter.

Can the premium be altered during the tenure?

In most cases, especially for level premium term plans, it cannot. The premium is calculated while considering several factors and, once chosen, will remain the same for the duration of the policy.

What happens if I am unable to afford the premiums?

A grace period is allowed for paying the premiums after the due date. However, the policy lapses if the premium remains unpaid even after the grace period.

How can I purchase a trustworthy life insurance policy?

You should check the reputation of the life insurance company, its overall track record, and the claim settlement ratio before making a decision.