Insurance Basics FAQ

In simple words, life insurance is a financial promise between the life insurance company and the buyer of a life insurance policy (known as the policyholder). As per the promise, the policyholder pays the company a fixed amount called 'premiums', for a fixed period of years. The period is called the ‘premium payment term’. The insurance cover, however, remains active for the entire policy term, which is the total number of years the policyholder is protected.

If life throws a curveball, and you're no longer there to provide for your family, due to a permanent disability or your unfortunate death, the insurance company steps in to fulfil its promise, handing your family a financial cushion - the 'Sum Assured'.

This is not just money; it's a continuation of your care for them, ensuring they can maintain their lifestyle and pay off loans, even in your absence. And guess what? Some policies even come with a parting gift at the end of the term, if you outlive the policy, called the 'Maturity Benefit'. Read more about the nuances & benefits of buying life insurance.

Life insurance is a must for every household. Imagine having a magical shield that protects your family's financial future, even when you can't be their superhero. That's what life insurance is - your way of ensuring that come what may, your loved ones will always have financial security. It's not just a policy; it's peace of mind, knowing your absence won't leave a void in their lives, at least financially. Check out this blog to get inspired.

Selecting a life insurance plan is like picking the best umbrella before a storm. It's a three-step breeze:

• Step 1: Sketch out your dreams - whether it's leaving a robust financial legacy for your family, clearing debts, funding your child's education, or creating a corpus for the future.
   
• Step 2: Decide on a premium that suits your budget.
   
• Step 3: Pick a policy that aligns with your plan.
   

Here's a tip: Preferably aiming for a life cover that's 10 times your annual income is like hitting the bullseye. And you'll be surprised at how affordable these plans can be!

Finding how much life cover do you need is like tailoring a suit. Start by looking at how much money your family needs every year. This includes, household expenses, school fees, bills etc. Next think about how long they would need this support — usually until children grow up or your spouse is financially independent.  Now, add any loans you currently have, like a home loan or personal loan, so your family doesn’t have to struggle with repayments. Finally, subtract the savings and investments you already have that your family can use easily.

The number you get is a good starting point for your life insurance cover. It doesn’t have to be perfect — what matters is that your family is financially protected.

Our term insurance calculator will help you choose a life cover that works for you.

^{IN ULIP, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER. THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.}

Here are the main benefits of life insurance:

i. Financial Protection:  Got a home or a car loan? In the twist of fate that is your untimely departure, your family might struggle with these debts, risking the loss of your home or car to lenders. In such a scenario, life insurance swoops in like a financial superhero, protecting your family from debt. It ensures that your family isn't burdened by these debts, keeping your hard-earned assets safe and sound. Term insurance plans, which provide a life cover at affordable premiums are suitable for this purpose.

ii. Savings:  Some life insurance policies come with a dual benefit of providing a life cover as well as savings benefits. Plans like Money-Back or Endowment aren't just about coverage; they're about smart saving for your life goals. These policies promise a lump sum at a certain milestone or upon retirement, turning your regular premiums into a sizeable nest egg for future you. If saving money is your goal, go for a savings insurance plan, that helps you save, earn an interest, and provides you with a life cover too.

iii. Wealth-creation: Who doesn't dream of growing their wealth with a little effort? This is where life insurance plays the role of a wealth wizard. Plans like Unit-Linked Insurance Plans (ULIPs) are not just safety nets; they're investment vehicles. They take a slice of your premium and invest it in the capital markets, aiming to amplify your wealth. So, you get the double delight of protection and investment.

iv. Tax-savings^%: Here's the icing on the cake; the premiums you pay for life or health insurance can trim your taxable income. Thanks to 80 C and 80 D of the Income Tax Act, these payments can morph into tax savings, under the old ta regime. It is like getting rewarded for being responsible and planning for your future. Just remember, tax benefits can change with the tides of tax laws, so keep an eye out for updates.

In summary, life insurance is a multipurpose financial tool. It's your family's financial defender, your future's builder, your wealth's enhancer, and your taxes' trimmer!

^{IN ULIP, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER. THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.}

Life insurance is your financial safeguard, evolving just like your life does. It's wise to review your life cover at key life stages:

i. Student Stage: Consider life insurance to protect your family against educational expenses and loans, especially if you're funding your education through loans.

ii. Starting a Career: As you begin earning and taking on household responsibilities, update your life cover to match your income and ensure your family's financial stability.

iii. Tying the Knot: Marriage brings shared responsibilities. Adjust your life cover to ensure your spouse's financial security.

iv. Parenthood: With kids, consider enhancing your insurance with savings or child plans for their secure future.

v. Retirement: In your 40s, focus on building a retirement corpus with plans like savings or ULIPs.

Regular reviews ensure your life insurance keeps pace with your changing needs, ensuring continuous protection for your loved ones. We have explained this in detail in this blog.

Whether you need a medical check-up before getting a life insurance policy often depends on various factors such as your age, the amount of coverage you're seeking, your health history, and the specific policies of the insurance company. Generally, for higher coverage amounts or for older applicants, a medical exam may be required to assess risk factors and determine premium rates.

However, some insurance plans offer coverage without a medical exam, though these might come with higher premiums or limited coverage. It's always a good idea to check the specific requirements of the insurance provider you're considering.

A good insurance ratio is when your life cover equals 10–15 times your annual income. This ensures your family’s financial stability, covering future expenses, debts, and lifestyle needs in case of an unfortunate incident.

Valid income proof documents usually include salary slips, Form 16, income tax returns, bank statements, and audited financials. These documents help insurers assess the applicant’s income and decide the appropriate coverage amount, especially for self-employed individuals.

Common documents accepted for verification include Aadhaar card, PAN card, passport, voter ID, and driving licence. These documents may be used to verify identity, age, or residential address during policy issuance, depending on the insurer’s requirements and applicable regulations.

Yes, the Aadhaar card is widely accepted as a valid proof of identity and address. It simplifies the verification process and is commonly used during insurance purchase, KYC checks, and policy servicing requirements.

The beneficiary is the nominee chosen by the policyholder to receive the life insurance payout. This is usually a family member or dependent who relies on the policyholder for financial support.

The registered nominee or legal heir can claim life insurance after the policyholder’s death. Claims require the submission of documents such as a death certificate, policy details, and identity proof for processing.

^{IN ULIP, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER. THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICY HOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.}

Yes, you can receive a payout before death through features like surrender value, partial withdrawals (in ULIPs), or riders such as critical illness or terminal illness benefits. These options provide financial support during tough times. Additionally, in term insurance plans you can opt for the Special Exit Value (SEV)^& feature that allows you to exit the policy at age 55 and get all your premiums back. Or you can opt for a Term Insurance with Return of Premium (TROP) that will return all your premiums^@ on maturity. 

The 5 Cs of insurance are Coverage, Cost, Conditions, Customer Service, and Claims. They help evaluate a policy’s value, balancing premium affordability, protection scope, service quality, and claim settlement reliability.

Yes, life insurance after age 55 is still valuable. It helps cover outstanding debts, medical costs, or estate planning and ensures financial security for dependents. Opt for shorter-term or whole-life plans to maintain affordability and coverage.