General information about life insurance |
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| Q. What is life insurance? |
A: Life insurance is an agreement providing for payment of a sum of money to the person assured or, Failing him to the person entitled to receive the same on the happening of certain event. |
| Q. Why do I need life insurance? |
| A: Life Insurance provides for financial security in the event of death or on the inability to earn due to physical disabilities. Besides providing for financial security in the case of one's untimely death, it can be used to accumulate a kitty for your old age, systematically build assets, for funding your child's education and also for saving on taxes. |
| Q. I know I need life insurance, but cannot afford the coverage I need. Can I do anything to lower the cost? |
| A: The cost of life insurance depends on three factors: your age, health and your income. We suggest that you not compromise on the level of protection you require. You could purchase a basic protection policy that gives you the opportunity to pay only the minimum premium. You can choose this affordable policy, without any riders. |
| Q. What are the various types of insurances? |
A: The insurance sector is classified into Life and Non-life (or General insurance as we know it).
Under Life insurance, an individual's life is covered i.e., the insured's nominee receives a certain sum of money if the insured individual dies within a specified time.
Under General Insurance, everything but an individual's life is covered. Thus, an individual could insure himself for his health, home, automobile, travel, office, shop, and even pets. |
| Q. What type of insurances should I have? |
A: To ensure you are safe, the least you should do is to ensure that you have
- Health insurance
- Life insurance, Accident Insurance
- Automobile insurance
- Home insurance
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| Q. Which type of policy is best suited for me? |
A: The type of policy that suits you best depends on many factors, such as your insurance objectives, your income, assets, liabilities, number of dependent members in your family and family expense. Life insurance policies are broadly classified in to followingr categories
Endowment policies
An endowment policy covers risk for a specified period, at the end of which the sum assured is paid back to the policyholder, along with the bonus accumulated during the term of the policy.
Money Back Policies
Unlike endowment plans, in money back policies, the policy holder gets periodic payments during the term of the policy and a lump sum amount on surviving its term. In the event of death during the term of the policy, the beneficiary gets the full sum assured without any deductions for the amounts paid till date, and no further premiums are required to be paid.
Unit Linked Insurance Policies
ULIP is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life insurance policy which provides a combination of risk cover and investment. The dynamics of the capital market have a direct bearing on the performance of the ULIPs. In this type of policy, the investment risk is generally borne by the investor.
Whole life policies
A whole life policy runs as long as the policyholder is alive. As risk is covered for the entire life of the policyholder, therefore, such policies are known as whole life policies.In a whole life policy, the insured amount and the bonus is payable only to the nominee of the beneficiary upon the death of the policyholder. There is no survival benefit as the policyholder.
Children's policies
Children plans help the parents in building fund for expected expenses such as higher education expense, wedding expenses, etc.Children's life can also be insured at young ages which could be advantageous since they are offered at very low premium.
Term Life Policies
Term Insurance is a simple insurance plan that covers the life for a specific "term". Death benefit is paid only if the person dies within this covered period. Since its a no-frills product, it is also the cheapest amongst the Life Insurance Products.
Pension Plans
Pension Plans are Individual Plans that gaze into your future and foresee financial stability during your old age. These policies are most suited for senior citizens and those planning a secure future, so that you never give up on the best things in life
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Do you know the Keywords of Life Insurance |
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| Q.What is the benefit of opting for riders / add-ons? |
A: Riders / add-ons are the additional benefits that can be added to the basic old policies prior to July 1, 2006, by paying a marginal additional premium. Riders offered by us are:
a. ADBR: Accident & Disability Benefit Rider
b. ABR: Accident Benefit Rider
c. CIBR: Critical Illness Benefit Rider
d. WOPR: Waiver of Premium Rider.
e. IBR: Income Benefit Rider. |
| Q.Who is a Beneficiary? |
A: The person(s) named in the policy to receive the life insurance proceeds upon the death of the insured. |
| Q.What is the Cash (Surrender) Value? |
A: The amount that is available in cash for loans and that may be available for withdrawals. Accessing Cash Surrender Value may reduce the death benefit and may increase the risk of lapse. |
| Q.What is Convertible Term Insurance? |
A: Term insurance which can be exchanged (converted), at the option of the policy owner and without evidence of insurability, for a permanent insurance policy. |
| Q.What is the Face Amount? |
A: The amount stated on the face of the policy that will be paid in case of death. It does not include additional amounts payable under accidental death or other special provisions, or acquired through the application of policy dividends. |
| Q. What is Level Premium (Life Insurance)? |
| A: Life insurance for which the premium remains the same from year to year. The premium is normally more than the actual cost of protection during the earlier years of the policy and less than the actual cost in the later years. The building of a reserve is a natural result of level premiums. The payments in the early years, together with the interest that is to be earned, serves to balance out the underpayment of the later years. |
| Q.What is Paid-up Insurance? |
| A: Insurance that will remain in force with no need to pay additional premiums. |
| Q.What is a Participating Policy? |
| A: A life insurance policy that is eligible for the payment of dividends by the insurer (see also Dividend.) |
| Q. What is Renewable Term Insurance? |
| A: Term insurance which can be renewed at the end of the term, at the option of the policy owner and without evidence of insurability, for a limited number of successive terms. The rates generally increase at each renewal as the age of the insured increases. |
| Q.What is term insurance? |
| A: Term insurance is a basic type of insurance coverage that you can buy, as the name implies, for a specified period of time. Term insurance is strictly insurance, and has no cash value. It also offers the lowest premiums. When a term life insurance policy expires, you must renew it to continue the coverage, and premiums increase in proportion to your age. |
| Q.What kind of life insurance should I buy? |
| A: If you have long-term needs - for example, if you require life-long protection for premature death, retirement income or cash to settle your estate - then you should consider cash value insurance. Likewise, if you need protection for a specified period of time, perhaps to pay off a loan or mortgage in the event of your death, term insurance may be the right choice for you. |
| Q.Can I increase my life insurance coverage? |
A: Usually, you can increase your coverage with a new policy or by adding a rider to your existing policy. However all coverage increases require you to provide evidence of insurability to your insurer. |
| Q.What are the definitions of “convertible” and “renewable”? |
| A: "Convertible" and "renewable" are provisions in a term insurance policy. With a convertible policy, the policyowner has the option to exchange the policy for another insurance plan without evidence of insurability. However, term policies can only be converted to cash value policies. With a renewable policy, the policyowner can renew (or extend) the policy at the end of its term without evidence of insurability. When a policy includes both provisions, they continue until specified ages and then stop. Premium rates increase at each renewal, based on the insured's age. |
| Q.Do life insurance policies pay dividends? |
| A: Some companies issue participating policies that pay dividends. Here's how it works: Premiums include a safety factor to cover unexpected occurrences during the year. At year end, insurers analyze actual costs and earnings, and return any surplus to policyowners in the form of dividends. |
| Q. If I miss a premium payment, will I lose my insurance coverage? |
| A: If you pay the premium within the grace period following the due date, you will not be subject to a penalty or loss of coverage. |
| Q.When can my policy lapse and what can I do if this happens? |
A: Your policy can lapse or terminate when a premium is not paid by the end of the grace period, if the policy has no cash value. If the policy has adequate cash value, you can rise loan against your policy to pay the premium and keep your policy alive. You could also use one of the policy's non-forteiture options which allow you to:
- Surrender your policy and collect its cash value;
- Purchase a reduced amount of paid-up cash value life insurance.
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| Q.Can I have a lapsed policy put back into effect? |
| A: Yes. If you provide the insurer with evidence or insurability and pay all back-premiums plus interest. This is called "reinstatement".Reinstatement can occur within the stipulated time from the date of lapse, as per the condition laid down in the policy document. The advantages of reinstating a lapsed policy are: (1) you pay the original premium rate; (2) the cash value of the original policy will be greater than that of a newly issued policy |
| Q. I have not paid premium for some time. I want to discontinue my policy. Do I get anything back from the insurance company? ? |
A: The insurance company provides a grace period during which you can pay the premium and keep the policy in force. For a regular premium paying policy, premium has to be paid within 30 days of the due date (15 days if the mode selected is monthly).
If it has been less than 3 years since you purchased your policy and not paid premium, you may not receive any money back from the insurance company.
If you have paid premium for more than 3 consecutive years, you will receive a proportion of the premium paid; depending upon the sum assured, the bonus accrued; if any, the number of premiums paid and the term of the policy. (The amount receivable is known as the surrender value.)
However, please note that the surrender value will vary by company and policy.
The surrender value depends on
Type of policy
Amount of premium
Policy term
Number of years for which the premium has been paid and
Accumulated bonus, if any. |
| Q.I have not paid premium for some time. Can I revive my policy? |
A: For a regular premium paying policy, premium has to be paid within 30 days of the due date (15 days if the mode selected is monthly). The insurance company provides a grace period during which you can pay the premium and keep the policy in force. If the premium has not been paid within the grace period, the policy is considered lapsed.
Insurance companies offer various schemes that facilitate the process of reviving lapsed policies. A few are mentioned below
Paying all the arrears of premium and the interest for the same period can revive the policy.
In certain cases, the company may offer instalment revival schemes, where you pay a part of the arrear along with the regular premium, and the balance of the revival amount is paid in instalments spread over a year of two years.
Under another scheme, a money-back policy can be revived by using the survival benefit under the policy (the money receivable from the insurance company at regular intervals) to pay premium plus interest. (If the survival benefit amount is lower than the revival value, you have to pay the shortfall. If it is higher, you receive the excess amount.)
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| Q.Will my premium amount increase after I have bought a policy? |
| A: Typically, when you buy an insurance policy, it is a contract or an agreement that you are entering into with the insurance company. It is a fixed price (premium) that you are willing to pay in order to remain insured for the term of the policy. Thus, such a price (or the premium amount) is pre-fixed and the insurance company cannot increase the same later. However, as the Finance Ministry levied a service tax on insurance companies in 2002-03, premiums payable by the insured may increase!!! |
| Q.May I change my beneficiaries? |
| A: You always have the option to change your beneficiaries. Review your beneficiary designation periodically to remain secure about the distribution of you policy's proceeds. |
| Q.What effects will inflation have upon my policy's cash accumulation? |
| A: Inflation typically raises interest rates and, consequently, your rates of return. Like other investments, funds placed in cash value, dividend-paying insurance policies should reflect increased earning rates. |
Information about Individual, family and Group policies |
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| Q.How does my group life insurance policy differ from a personal life insurance policy? |
| A: Since group life is issued as a single master policy to an employer or association, as a plan participant, you have no control over the price or amount of coverage. If you leave the group, your coverage usually terminates. |
| Q.Will my family receive the insurance amount immediately after my death? |
| A: Usually the proceeds of the insurance policy are made available to the nominee in a period of 3 months; provided all the relevant paperwork has been done. If you have purchased a policy for your child, then please verify the details of the policy. Few children's policies offer no money to the nominee upon the death of the proposer or the parent. |
Nominee information |
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| Q.What is nomination? And who is a nominee? |
A: Nomination is a right conferred on the life insurance policyholder to appoint a person or persons to receive the policy monies in the event of the policy becoming a claim by death. Any policyholder, who is a major and the life insured under a policy, can make a nomination.
A nominee is the person designated by the policyholder to receive the proceeds of an insurance policy, upon the death of the insured. |
| Q.Can I change my nomination? |
| A: Yes. You can change your nomination at any time till the maturity date. All you need to do is to inform us about the change through the specified form. |
| Q.What details am I to provide about the nominee/s? |
| A: The following details are necessary when filling in the proposal form: full name of the nominee, address, age, and the relationship between you and the nominee. |
| Q.What is the difference between nomination and assignment? |
A: While nomination is an authorisation to receive the policy monies in the event of death of the life assured, it does not give the nominee an absolute right over the money received to the exclusion of other legal heirs. Further, the nomination can be revoked or cancelled at any time during the lifetime of the policyholder at his will and pleasure or by a subsequent assignment.
On the other hand, assignment of an insurance policy is a transfer or assignment of all rights and liabilities of the insurance policy in favour of the assignee. |
