The Nuts and Bolts of Life Insurance for Indians

Life Insurance

For people in India, applying for life insurance can feel like a daunting task and probably somewhat of an uncomfortable feeling that they rather not think about anyway. The harsh reality is, though, that life insurance is one of those things which is better if bought “10 years early rather 10 minutes too late”.

Life Insurance

Sometimes people don’t fully understand why life insurance is important and hence fail to acknowledge why proactive financial planning may be necessary for the family left behind. Perhaps this is due to life insurance’s complexity with a lot of laws and its terminologies. But if armed with proper information and facts, one can simplify the decision making the process about whether life insurance is the right decision for you and your family or not. 

Life Insurance doesn’t have to be a mystery. Here is a quick review of some of the basics facts and guide of life insurance that you absolutely need to know about:

If Someone Relies On You Financially, You Need Life Insurance

There are wide varieties of scenarios which pushes you to buy life insurance, but the simplest rule of thumb for determining who needs life insurance is: Does your family rely on your income for their financial wellbeing? Buying life insurance is obligatory if you are a spouse or parent of dependent children. 

Life insurance provides cash to your family and loved ones after your death. The death benefit helps in replacing your income and can help your family to maintain their current lifestyle. In addition, life insurance provides valuable peace of mind for the policyholder. 

Life Insurance Is Surprisingly Affordable for Most People

Most people overestimate the cost of life insurance policy to the point that they don’t consider buying it at all. In fact, this is the most common misconceptions of life insurance policy.  But, the truth from a long perspective is that it’s not. It’s more expensive, in a way, to not have life insurance. Term plan being the simplest form of protection plan can provide great value for the premium paid. It will secure your family’s financial future and help them to meet their basic needs in your absence. 

The cost of life insurance depends on various factors and the policy chosen. Just as a general guide – a healthy 30-year-old can easily secure Rs 1 Cr of term life insurance for a tenure of 30 years for around Rs 800- 1200 p.m. – much less than most people think of. However, the actual cost would depend on factors like your age, health and the amount covered. The life cover is at least 10 times the amount of premium paid towards the policy. 

The Medical Exam

It is strictly recommended to go for a medical checkup before buying a life insurance policy. The main reason is that the insurer wants to assess the risk of paying out the death benefit on your policy. A typical exam will include some personal questions about your height, weight, and your medical history followed by some additional tests like a blood test. As a rule of thumb, the younger and the healthier you are, the lower your premium charges will be, for the simple reason, the risk of premature death is lower. However, there can be some cases that one does not want to take a medical exam, due to personal history otherwise. To overcome this concern, insurers offer options for telemedical and non-medical. E.g. TATA AIA Life Insurance, HDFC Life Insurance. 

Life Insurance Payouts 

The Life insurance death benefit is paid to policy beneficiaries after the demise of the policyholder. Beneficiaries are required to file a death claim with the insurance company by submitting a copy of the death certificate. On the basis of it, insurance companies review the claim and issue the payout. Life insurance companies generally payout your beneficiaries quickly, sometimes in weeks or usually inside a month and that money will not be considered taxable income for them. 

Life insurance can be more than just life insurance

We all are in the time where we give more preference to ‘living benefits’ rather than the ‘death benefit’. Attaching riders to a life insurance contract not only easily provide financial protection in your absence but also cater to our living benefits. In a time of need such as when the insured suffers from any type of critical disease or disability, the insurer provides with the money that you can access when you are alive or use to pay for long-term care. The most important thing to know about life insurance is that it’s there to help the people you love the most.

(Views expressed above are the personal opinion of Santosh Agarwal, Chief Business Officer- Life Insurance, policybazaar.com)

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