Why Life Insurance?

We prioritize insurance planning because uncertainty can create havoc with finance of the family. It is well known that “Only two things are certain in LIFE, one is Death and other is Tax” Our Insurance Planning will help you understand whether you are under-insured or over-insured and the existing policies can be earmarked in the insurance planning structure.

The proceeds from a life insurance policy are paid to the beneficiary on a tax-free basis, which provides a lump sum amount that can be used for a number of purposes. Depending on the type of policy chosen, life insurance can also provide a savings component for the policyholder.

The main reason people consider buying life insurance is to protect the people they leave behind. Having coverage in place is especially important during the policyholder's main earning years. During this time, he or she may have major expenses such as a mortgage, car payments and the like.

How does life insurance provide financial security?

The Term Plan

The main reason people consider buying life insurance is to protect the people they leave behind. Having coverage in place is especially important during the policyholder's main earning years. During this time, he or she may have major expenses such as a mortgage, car payments and the like.

He or she may have young children that need to be cared for, and/or aging parents that require assistance. In the case of a stay at home parent or spouse the funds may be used to pay someone else to perform the tasks, like cooking, housekeeping and child care, which was provided by the deceased earlier.

The death benefit that an insurance policy provides is meant to replace income so that the policyholder's family is less likely to have to face a major lifestyle change in addition to dealing with the loss of someone who is very important to them. Most people are underinsured, as opposed to having enough coverage.

Ideally, the level of protection chosen should be enough to replace the policyholder's gross income for a number of years. Where the policyholder has a young family, it's not unrealistic to look a plan that will pay out an amount that is equal 10 years of earnings or more.

There are TERM policies which can give you a part of the sum assured as lump-sum and rest of the amount as monthly payout creating a pension like structure for a certain period of time.

Term Insurance

Term insurance, a type of life insurance, provides coverage for a certain period of time or years. If the insured dies over the policy tenure a death benefit (or sum assured) is paid out. No payout is made if the insured survives the tenure.

The purpose of taking life insurance is to provide life cover to the policyholder and financial security to her/ his family.

There are two ways the individual can take life insurance:

1. By opting for a pure life cover, also known as term insurance

2. By taking life cover with a savings component built-in, also called endowment insurance

Why term insurance is better

Term plans provide pure life cover. This means there is no savings / profits component. They are basic plans which make life insurance more affordable vis-à-vis other options. It is possible for the policyholder to opt for a larger life cover at a lower premium when compared to a similar endowment plan.

Some of the key features that make term plans indispensable include

1. Larger life cover

Since term life insurance plans are more affordable it is possible for an individual to opt for a higher life cover for the same premium as an endowment plan. For e.g. a 30-year old can get a term plan with a cover of Rs 1 crore for a 30-year term by paying a premium .

The Rs 1 crore endowment plan will most likely out of bounds for most 30-year olds. However, taking a term plan for a similar cover is relatively more feasible.

2. Riders

The policyholder can attach riders to the term plan, thereby enhancing the utility of the policy. So by opting for a critical illness rider or a critical illness plan, for instance, she/he is entitled to receive the sum assured on being diagnosed with the critical illness. This is in addition to the death benefit of an equal amount on death over the term of the policy. There are other riders to choose from like – loss of employment cover, disability cover, waiver of premium cover, among others. The policyholder should select riders based on her/his specific needs to make the life cover more suitable and meaningful.

3. Enhanced cover

Certain insurance companies offer the flexibility to enhance the life cover during critical stages of the policyholder’s life. For instance, the policy-holder may be permitted to enhance life cover by 50% at the time of marriage and by 25% at the time of turning a parent. This makes it possible for her/ him to start with a modest cover and then enhance it as responsibilities increase as also the ability to pay higher premium.

4. Innovative features

While insurance companies have been quick to innovate in general, they have been most innovative with regards term plans. For instance, companies have been quick and proactive in cutting premium rates even offering extra discounts to certain categories like non-smokers, for instance. Buying term plans is now quite convenient thanks to the internet. It is possible for a healthy individual, as defined by the insurer, to buy a term plan over the internet without taking a medical test.