A: Life insurance is basically a contract that an individual as a policyholder signs with the insurance company. As per the terms and conditions underwritten in the contract, the life insurer pays out a sum assured as maturity or death benefits to the policyholder or the nominee in the event of unfortunate demise of the policyholder during policy term. The insurance policy holder pays a regular or a lump sum premium to ensure the protective component of the life insurance policy remains active through the policy term.
A: There are various kinds of life insurance plans available today catering to the diverse needs of various policyholders. The popular categories of life insurance plans include term plans, endowment plans, unit linked insurance, money back life insurance, child life insurance and whole life insurance respectively. Each such plan has its own unique benefits and advantages and the users can choose the apt life insurance plan as per their needs and security.
A: Term insurance plans are the simplest form of life insurance offering the policyholders a protective cover for a prefixed tenure of 15 or 20 years. In a term insurance plan, the nominee of the life insured gets the sum assured at the time of death of the policyholder as death benefits. No survival o maturity benefits are paid under term insurance plans. The premiums of term insurance plans are the lowest compared to other insurance types.
A: The one big advantage of term life insurance plan is that the plans are pocket friendly with lower premium requirements. This means more people across all sections of society can opt for life insurance and have an essential protective component. The premium amount paid for a term plan also qualifies for tax deductions under Section 80C of the IT act.
A: Endowment plans offer a double benefit of protective insurance component along with an investment component. A part of the premium offers protection against life and the other half is used as investment in various equity and debt instruments offering decent returns over a period of time or at maturity.
A: Endowment life insurance plans offer safe investment options while offering the additional benefit of life protection. Endowment plans invest in safer debt instruments allowing for assured returns on maturity making the investments safe while ensuring an optimum death protection.
A: Unit Linked Insurance Plans offers investment in equity and debt funds, offering market linked returns. Unlike endowment plans, which offer assured returns, the returns are linked to the financial market. The high risk-high reward scenario means that returns generated by ULIPs are often higher than traditional endowment plans. Unit linked plans continue with the protective death benefits just like endowment plans.
A: Unit linked plans offer the benefits of high returns owing to their market linked returns. In a booming economy the returns generated by ULIPs can be significantly higher than traditional plans. ULIPs also allow the policyholders to switch between high risk equity funds to lower risk debt funds as per the financial needs and risk taking capacity of the policyholder.
A: Whole life insurance offer protection for the policyholder for the entire duration of life. The maturity date of such plans is fixed at either 100 years or for the whole life of the policyholder. Whole life insurance offers bonuses to the nominee as death benefits.
A: Whole life insurance comes with no or very later expiry date of a 100 years. Unlike other plans, the policyholder can be vulnerable post maturity with no insurance. Whole life plans offer a protection benefit for life.
A: Money back insurance plans offer a part of sum assured at pre fixed intervals at various stages of a life insurance tenure. The remainder of the sum assured is kept as death protection for the life insured.
A: Child insurance plans are tailor made to cater to the financial needs of a child. Such plans are devised to ensure the financial future of the child is secure offering guaranteed sum assured at maturity which can be used by the child for educational or marriage needs etc.
A: Child insurance plans offer life insurance for the parent and create a financial corpus for the growing child. Should the parent as a policyholder expire during the policy term, all future premiums are waived off and a guaranteed sum assured is paid to the child at maturity.
A: Pension plans are life insurance plans that offer a payout of annuity after retirement to ensure the sunset years of life come with a regular income flow. Pension plans have an accumulation phase where premiums get accumulated and then payouts or annuity is initiated post retirement. Pension plans also offer a protective component as life insurance.
A: Pension plans allow for a retirement plan which ensures the policyholder is not faced with any liquidity crunch post the active working years of life. Pension plans are also ULIP based investing in equity and debt instruments or traditional ones investing only in safer debt instruments.
A: There is no right time for a general rule to buy insurance but the sooner one buys it the better it is. The day one has any dependents or is the sole breadwinner, is a good time to seek life insurance policy.
A: The amount of insurance required will depend on your financial income, the number of financial dependants, your age, your overall standard of living etc. A common method suggested by experts is to get a cover between 10 to 12 times your annual incomes. Also the sum of your life insurance plan must be that amount which if invested can seek a regular income for your family members in your absence.
A: The sum assured is the amount that the life insurance provider offers to pay the nominee of a life insurance policyholder as death benefits.
A: Annuity refers to regular payouts offered by a pension plan to the policyholder. Pension plans can be with immediate annuity payments or plans offering deferred annuity after a certain number of years post policy.
A: Life insurance plans offer additional riders that offer additional protection like critical illness benefit or accidental death benefit making insurance more comprehensive. An insurance seeker can opt for riders to make the insurance better covered although riders come with an additional premium costs.
A: Surrender value is the amount of money the insurance provider will pay a policyholder should he choose to discontinue to policy mid way after payment of certain minimum premiums. A paid up value is the amount that is generated once a policyholder stops paying premiums mid way but does not withdraw the money upfront. The policy then generates a paid up value. The insurance company reduces the sum assured component and pays the remaining amount at the end of policy term.
A: Insurance plans that offer a surrender value are eligible for loan against life insurance. Term insurance plans and unit linked insurance plans are hence not eligible for loans.
A: Yes, it is safe to buy insurance online by either going to the website of the insurer directly or making use of services offered by an online insurance aggregator. With no agents involved the chances of mis-selling are minimal with an online purchase. The premium amounts are also budget friendly with no added agent commissions involved in an online insurance purchase.
A: Child plans are insurance cum investment financial instruments catering exclusively to manage the financial needs of a growing child. Child plans are designed to offer financial security for all the growing needs of a child at various stages of life including higher education and marriage. Child plans also offer an additional security protection by offering life insurance to the policyholder parent. The child as a nominee gets paid the sum assured in the event of unfortunate demise of the policyholder during the policy tenure. All pending premiums are also waived off in such a scenario.
A: Child plans are tailor made to ensure the financial future of the child is secure. Consider the rising inflation and increase in the cost of essentials like school and college education fee, having a financial corpus for the same is an unavoidable financial significance. Considering that MBA costs from a reputed college today cost anywhere between Rs. 25 to Rs. 35 Lakhs. Add to it the inflation and the cost will go even higher in 10 to 15 years’ time. Child plan ensures that financial corpus for your child education is substantial enough to bypass all such financial challenges. Child plans also offer periodic pay-outs, which means that your child has access to money as and when required in certain pre-determined ages. As a parent, you can assure a healthy and prosperous future for your child by investing in the right child plan.
A: Child plans can be bought for your child from the day the child is born. Ideally, child plans should be bought as soon as the child is born to ensure your child’s financial health remains secure irrespective of any financial uncertainty in the future.
A: Yes, you can buy child plans the every day the child is born depending on the eligibility norms of the child plan.
A: Child plans can be bought by parents as well as grandparents for their children and grandchildren. Check the eligibility age criteria to buy the selected child plan to ensure your age category meets the eligibility criteria of the plan.
A: Unit linked plans or ULIPs are insurance plans that offer a dual benefit of insurance and investment for the policyholder. Part of the premium paid is used as a life cover protection while the other part is used for due investments in various market linked instruments. ULIPs invest in both equity and debt funds allowing for market linked returns for all kinds of investors from high risk ones to those seeking investments with medium to low risk.
A: Unit Linked Plans are largely classified as per the death benefits offered by the plan. As per the death benefits on offer ULIPs are either Type 1 or Type 2. Type 1 ULIPs offer death benefits to the nominee or the policyholder, which is equal or higher of the Sum Assured or the fund value of the plan.
For example, if Mr. A has Type 1 ULIP plan with a sum assured of Rs. 50 Lakhs and has paid the premium for 10 years. If his assimilated fund Value of Rs. 35 Lakhs, the nominee of Mr. A will get the higher of Sum Assured (Rs. 50 Lakhs in this case) or fund value (Rs. 35 Lakhs) as death benefits if Mr.A expires during the policy tenure.
In Type2 UIP plans, the nominee is paid out a death benefit of Sum Assured along with the fund value of the fund on the day. So for the above example Mr. A’s nominee will get an accumulated sum of Rs. 85 Lakhs (Rs. 50 Lakhs +Rs. 35 Lakhs)
A: ULIP plans are an important insurance cum investment tool offering good returns on account of investments in the equity market. The plans allow policyholders to switch between various funds as per their risk taking capacity to ensure the investment is personalized for each policyholder. The funds are managed by an experienced fund manger allowing for a professional insight into investments. A policyholder can also keep a track on the investments and net asset value of the insurance knowing details of returns accumulated till date. ULIPs also allow for a partial withdrawal facility after five years of investment in the plan. ULIP investments are eligible for tax deduction under Section 80C provided the premium paid is less than 10% of the sum assured. Death benefits paid under ULIPs are also tax free.
A: The common charges associated with ULIP plans are as follows:
Premium allocation charge: ULIP insurers charge a premium allocation charge from the policyholders. The charges are taken as a small percent of the premium paid. The funds from premium allocation charges are used to cover the initial charges of the insurer like distributor fee, underwriting cost etc. So if you invest Rs 5,000 each month in a ULIP plan with 2% premium allocation charge, Rs. 100 would be deducted upfront from the premium by the insurer.
Policy administration charge: Policy administration charges can be either charged per month or as a flat rate for the policy term. These are the charges insurer seeks to offer the life insurance policy.
Fund management charge: Fund management charges are levied to cover the expenses of fund management by the insurer. IRDAI guidelines have fixed a maximum upper limit of 1.35% per annum on fund management charges.
Surrender charges: surrender charges are applicable if a policyholder plans to premature, partial or full encashment ULIP invested units Mortality charges: Mortality charges are the cost one needs to bear for getting an insurance cover. Age and Sum Assured are used to calculate the final mortality charges for a ULIP plan.
Fund switching charge: ULIPs allow switching between funds from equity to debt components. While some switches are offered free for the year, additional switches call for fund switching charges. The amount can vary as per the plan and insurer involved.
A: With the equity investment component, there is a general perception that ULIPs are high risk investment options. The fact is that ULIPs allow for a switch between equity to debt components making it ideal for all investors including high risk and medium to low risk ones.
A: Pension plans are also known as retirement plans where one allocates a part of the savings which then accumulate over a period of time offering steady income stream post retirement. Pension plans offer the dual benefit of life insurance along with investment benefits offering maturity benefits for the policyholder. In the event of unfortunate demise of the policyholder during policy tenure, a pension plan offers the beneficiary a sum assured along with accumulated bonuses.
Retirement plans or pension plans offer the policyholder regular payouts post their working years. These regular payouts given by the pension plan can be used towards financial well being and management of day to day expenses. Such payouts given by pension plans are known as annuity. Annuity can be availed either every month, every quarter, half yearly or annually as per the selected pension plan and the financial needs of the policyholder.
Annuity is broadly classified as deferred annuity and immediate annuity depending on how soon or late the annuity begins in a pension plan. A deferred annuity plan allows for time for a financial corpus to get accumulated with regular premium payments. Once the policy term is over, the plan offers annuity payouts as per the timeline preferred by the policyholder. In an immediate annuity plan, the annuity payouts start immediately as the policyholder needs to deposit a lump sum amount with the pension plan to avail the regular immediate annuity.
A: Pension plans offer a dual benefit of life insurance along with investment option for the sunset years of life. With a pension plan you can make sure you have some sort of a pension income to take care of the day to day financial needs and maintain your standard of life even after your active working years. With the rise in inflation, a normal savings account of saved money may not be sufficient for your later years and pension plans offer a great way to ensure financial freedom in the sunset years.
A: A provident fund account is a good way to ensure adequate savings but that alone may not be sufficient to cater for the financial needs of the future. Rising inflation, growing medical needs and rising medical costs all can add up a substantial amount and a pension plan can ensure the annuity paid out is regular to tackle any of such expenses.
A: Group term insurance is a term insurance policy that is offered to a group of people collectively. A group term insurance is usually taken by an employer to ensure the life protection of all the employees is safeguarded at all times. A group term insurance works just like a term insurance plan, offering a sum assured component in the event of the unfortunate demise of the group term policyholder during policy tenure.
A: A group term insurance plan is offered to a group of people unlike term insurance plans for individuals who are offered for each individual. The policyholder does not have to pay for the premiums for a group term plan as the employer or the group manager facilitating the group term insurance plan pays for all the premiums. In an individual term insurance plan, the policyholder needs to pay the annual premium for the term insurance plan.
A: Any of the employee-employer groups along with professional group of people looking for a collective group insurance can seek group term insurance. A group can be non employer-employee group, employer-employee group, bank, microfinance institution or any other professional group.
A: There are various types of group term plans that can be offered by the insurer depending on the need of the group. Some group term insurance plans offer uniform cover to all members while others can offer grades in cover leading to a higher cover for more experienced or older employees compared to new or recent ones. Similarly some group term insurance plans also offer the option to choose from additional riders like critical illness rider or accident or disability benefits. A group term insurance plan may sometimes also offer cover for outstanding home or car loans. It all depends on the terms and conditions between the group and the term insurer issuing the group term insurance plan.
A: No. Group term insurance plans as the name suggests are primarily term insurance plans and offer no maturity benefits. The term insurance plan offer protection for the policyholder till the insurance plan is valid and pays out a death sum assured to the nominee.
Car insurance policy is classified into two categories namely third party insurance and comprehensive insurance. Opting for a third party insurance is compulsory as per the Indian Motors Act, while opting for a comprehensive insurance is optional.
Third party insurance offers protection only for any third party damages to individuals or property. No claims are entertained for theft or damages caused to your own vehicle or self in the event of a car accident.
Car insurance can be bought off the shelf from a car dealer but such insurance plans are usually expensive on account of dealer commissions. Instead, purchasing car insurance online can be more cost effective.
Buying a car insurance policy requires minimal documentation. Documents required for buying insurance for a new car include a valid driving license as part of your identity proof, a copy of Registration Certificate of your vehicle, and a proof of residence. All the documents must be accompanied by a duly signed proposal form and insurance premium cheque.
Third party insurance is an insurance cover that offers protection to any third party that may get affected in the event of a motor accident. Essentially, third party insurance covers any bodily harm or injury caused to a third party including damage to a person or property. It is mandatory to have third party insurance before you can drive a vehicle on the road.
A: Third party insurance is a liability only insurance, which is mandatory for all vehicles before they can run on the road as per the Indian Motor Vehicle Act. Third party insurance offers protection towards any legal liabilities for damages to a third party or a third party's property on account of any accident or mishap.
A: A comprehensive cover is an additional cover available for all vehicle owners apart from the mandatory third party insurance cover. A comprehensive insurance plan offers more protection to your bike including protection against theft and any damages to the bike because of any accidents, fire, flooding or other such losses due to various natural calamities.
A: Since a comprehensive cover is a more all around protection offering cover for losses due to multiple factors including a theft cover, it is recommended over a third party insurance. Being a more secure insurance cover, the premium charges for a comprehensive insurance plan are higher than the mandatory third party cover. But with the rising costs of repair and increasing cases of bike theft, the extra premium can be worth it when faced with any such eventuality. You can also choose to make the comprehensive insurance plan more protective by offering for various add-ons like zero deprecation and protection for the pillion rider etc.
A: A bike theft is a real possibility and an ideal insurance plan should offer protection towards any such happenings. The theft protection however is available only in a comprehensive insurance plan and not with third party covers which offer a very limited liability oriented at third party damages.
A: The amount of money that will be paid to you on account of a bike theft will depend on the insured declared value of your two-wheeler. The insured declared value or IDV is the maximum amount you are liable to get and is based on the age, manufacturer, model, your location and other parameters as fixed by IRDA.
This type of insurance offers protection against medical expenses. A policyholder pays a certain premium and the insurance provider company pays for certain covered medical expenses that may be incurred while the policy is in force.
General health insurance policies cover medical expenses such as hospitalization room rent, doctor’s fees, surgical expenses, nursing charges, prescription expenses and so on. Related expenses incurred 30 days before hospitalization as well as recuperation, consultation fees, medications and other expenses incurred 60 days after discharge from hospital, known as pre and post hospitalization expenses are also covered.
The document issued by the health insurance company upon payment of premium is the health insurance policy. This constitutes the contract that is binding on the company as well as the policyholder and sets out all the terms, conditions, inclusions and exclusions of that contract.
These would include expenses incurred as a result of illness or accident during the policy term: hospitalization pre and post hospitalization expenses such as doctor's consultations, diagnostic or lab tests, follow-up tests and specialist consultations etc.
The amount payable per day of occupying a hospital bed is known as room rent. Some policies have a cap on the amount of daily room rent while others do not. A health policy may also clarify terms such as “private room”, “semi-private” or “shared ward”.
Whereas other types of health insurance policies are issued for insuring individuals, spouses and dependent family members, group policies are meant for groups. They are issued for groups of employees, members of certain associations, cultural groups or groups of people who use the same financial products such as credit cards, bank accounts and so forth.
Employee health insurance is more or less the same as group health insurance and both terms are often used interchangeable. The only difference is that group health policies is a broader term than employee health insurance and may be issued for groups of people other than employees as well, in some cases: members of an association, users of certain financial products for instance.
A typical group health plan will cover hospitalization of all covered individuals: room rent, specialist consultations, diagnostic tests, prescription medications, nursing charges, surgical charges, anesthetist charges and so on. Costs incurred 30 days prior to hospitalization and 60 days post discharge, prosthetics, recovery aids and so may also be covered. Many group policies offer maternity expenses as standard features.
Yes, covered individuals and their families (if applicable) can avail cashless facilities from all network hospitals with which the insurance company has tie ups. However, non network hospital claims could be subject to co-pay in some cases.
A group health insurance policy is the contract between the employer or policyholder and the insurance company who provides insurance coverage. The policy document outlines the features of the policy, inclusions, exclusions and all the terms and conditions and fine print of the policy.
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