Every financial expert considers life insurance to be the foundation of sound financial planning. But why is it considered to be so important? And what is it that you must know before you get life insurance? We have some answers to the most important 10 questions related to life insurance for you.
1) What’s life insurance and why do I need it?
Life insurance is a simple financial product where you pay a premium to the insurance company and your nominees - spouse, children, or other loved ones – get a lumpsum amount called the sum-assured in the event of your untimely death.
2) What are the benefits of life insurance ?
It acts as financial security for your family.
It secures your child’s future as it can take care of education costs or marriage expenses.
If you have existing loans, then your family is not burdened with the repayment of the loans in case of your sudden demise.
A life insurance policy can secure your retirement. You can opt for a life goal-based unit-linked insurance plan (ULIP) like the Bajaj Allianz Life Goal Assure, A Unit-linked Non-Participating Life Insurance Plan, which places your life goals at the core of its offering. You get a choice of eight funds, four investment portfolio strategies, and additionally loyalty additions (for annualized premium of Rs.5 Lakhs or more for policy term 10 years or greater) that are payable from the sixth year, and a Fund Booster (for policy term 10 years or greater) payable at maturity. Plus, it returns the mortality charges or life cover charges on maturity. One can refer to the sales literature of the product to get detailed information.
You are eligible for tax benefits at the time of purchase of a life insurance, and you or your nominees get a tax-free pay out at the time of maturity of the insurance policy subject to provisions stated under the Income Tax Act, 1961.
3) What happens if I am unable to get life insurance?
If this happens, you may want to find out why your application wasn’t processed or accepted. Health, low financials, place of residence, a dangerous hobby or occupation etc could be some of the reasons that could lead to you not getting a life insurance.
4) What is the correct age to get life insurance?
The suitable time to buy would be when you are younger, preferably in your 20s. When you’re younger you are usually healthier and you tend to pose less risk to an insurance provider, which is why you will be offered the most affordable rates.
5) What are the different types of life insurance plans I can avail?
Broadly, the common life insurance plans can be classified in three categories:
Term insurance plans are for a fixed period. These are considered to be the simplest form of life insurance where you can get a high sum-assured for a low premium.
Traditional Life Insurance plans give a lump sum amount or periodic income or both at maturity to you or your nominees in case of your demise. Under Traditional Life insurance, returns could be low risk and conservative.
Unit Linked Insurance Plans help you build market liked wealth in addition to having a life insurance. It provides market linked returns but also involves a high risk.
6) How do I select a life insurance plan?
To determine which policy you need, you need to take into account your age, risk appetite, life stage, number of dependents, how much money you will need to maintain their existing lifestyle, their needs, your liabilities and family’s financial goals. Always keep in mind inflation when making any investment decisions.
7) How do I decide on the insured amount?
You need to consider factors like your annual income, liabilities, and financial goals to determine the insured amount. Essentially, the insurance sum assured should be sufficient to pay off any liabilities you might have, to meet your family’s major financial goals and also meet their regular expenses for the foreseeable future.
8) When do I have to pay the premium and what if I don’t pay it?
If the premium is not paid by the due date of policy renewal, the policy will be considered as lapsed and the policyholder loses its benefits. However, all insurance companies also provide you with a grace period for a few days even after the due date. But if for any reason you are unable to pay the premium due even within the grace period, the policy benefits are reduced or policy can get terminated also. These depend on the product terms and conditions
9) What happens if my life insurance policy matures?
If your life insurance policy comes with maturity benefits, where you outlive the term of the policy, you will be entitled to claim the benefits. However, this works only if the policy is in force and all your premiums have been paid duly. This is usually applicable to traditional plans and ULIPs, as typically, Term Insurance policies are usually known for not having a maturity benefit, however there are term plans available in the market that provide return of premium as a feature. All insurance plans have a death benefit which is paid to the policyholder’s nominees in case of the policyholder’s sudden demise within the policy period, provided all due premiums are paid.
10) What is the difference between term insurance and traditional life insurance?
Term Insurance | Traditional Life Insurance | |
Coverage | Usually covers only premature death | Covers both premature death and survival until the policy tenure |
Premiums | Low & affordable | Higher premium compared to Term Insurance |
Maturity Benefit | Usually not payable. However, some new policies do offer return of premium. | Payable |
Death benefit | Payable under all plans as long as policy is active | Payable under all plans as long as policy is active |
Surrender or paid-up value | Paid-up or surrender value not applicable | If you decide to exit after a specified number of years before maturity, it will acquire a paid-up value and/or surrender value depending up on the policy terms and conditions |
Getting Life Insurance as per your needs
If you are looking to protect your family’s future from uncertainties, one of the preferred way to go forward is opting for a term insurance. Bajaj Allianz Life Smart Protect Goal - A Non Linked, Non Participating, Pure Life Term Insurance Plan can one of the preferred choices the benefits it offers, like a 3% discount on purchase of the policy online, or the return of premium option*, child education cover*, among others.
If your aim is to build market-linked wealth over time to achieve your life goals, opting for the Bajaj Allianz Life Goal Assure, A Unit-linked Non-Participating Life Insurance Plan can be a smart choice.
Whatever life insurance you choose, make sure your and your family’s financial goals are aligned with the decision. Also ensure that you do not remain under-insured by taking a lower sum-assured than what is needed in your situation.
References:
# Return of life cover charges = return of mortality charges (ROMC) which is payable on maturity, provided all due premiums have been paid.
3% Discount is available for regular premium and limited premium payment frequency under all variants of Bajaj Allianz Life Smart Protect Goal - A Non-Linked, Non-Participating, Pure Life Term Insurance Plan .
* Product feature/benefit mentioned above are dependent on variant
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