Everybody hopes for the best, but it is always better to prepare for scenarios that might not be ideal. This is why a backup in any situation always helps. This is especially true for life. A life insurance plan can offer financial support to your loved ones in your absence. Keep reading to find out how.
What is a Life Insurance Policy?
A life insurance policy is a contract between an individual, called the Life Assured, and an insurance company. Here, the company promises to pay a certain sum of money to the individual’s family in case he/she were to pass away during the agreed-upon policy period. The Life Assured, in turn, is required to make regular premium payments to the company for a certain number of years. Some life insurance policies also pay out a maturity amount at the end of the policy term in case of survival of the Life Assured.
In certain types of policies, there is also an option to get critical illness benefits or create additional protection for your family if you pass away from an accident. You can read about these features and types of life insurance policies below.
Why do I need Life Insurance?
- Critical Illness Protection: As you head towards retirement, life insurance policy that cover critical illnesses become important. Some life insurance policies offer you features that cover you from severe ailments like heart attacks and cancer. Buying these types of policies can protect you from some of the world’s most deadly diseases
- Family Support: If you have a spouse and kids, building a safety net for them becomes important. You would want to protect them from financial hardship in case of your untimely demise. You can also get good returns with life insurance by investing in some policies
- Savings Growth: In your early years of working, some life insurance plans can be a useful way to save and invest your money. ULIPs or Unit Linked Life Insurance Policies allow you to invest in equity and debt markets. Under current tax laws (which are subject to future amendment), you also get tax^ benefits for investing in a life insurance plan and on the maturity amounts of such policies
- Debt: You often take large loans in your working life, especially when it comes to buying a house. An untimely death while the loan is still due can have grave economic consequences for our families. In such a scenario, money from a life insurance plan in India can be used to pay off the loan. Policies taken under the Married Women’s Property Act+, 1874 are also immune from attachment by creditors.
Important life insurance terms you should know
- Life assured: The insured person is referred to as the life assured. In the unfortunate event of the life assured’s death, the nominee receives the insurance money
- Policy tenure: This is the duration for which the insurance company provides coverage. Policy tenure for a life insurance plan can range anywhere from 1 year to 99 years (whole life)
- Death benefit: This is the money that the insurance company pays to the nominee in the unfortunate event of the life assured’s death
- Maturity benefit: This is the money that the policy holder gets on surviving the policy term. Although a term life insurance policy does not have any maturity benefits, other life insurance plans offer this feature
- Lapsed policy: A life insurance plan can get lapsed if the policy holder does not pay the premium on time. In such cases, the policy is referred to as a lapsed policy and the insurer reserves the right to terminate the contract if the policy holder does not pay the premium even during the grace period
- Grace period: If the policy holder does not pay the premium, the insurance company offers an extension, also known as the grace period. This allows more time for the policy holder to make the payment
- Revival period: If your life insurance policy gets lapsed due to non-payment of premium, you can revive it later by paying the premium and any added charges. This is known as the revival period
- Riders: Riders are add-ons that can be added to a policy at an extra cost. They are completely optional but can enhance the coverage of your plan
- Claim process: The claim process refers to the steps involved in raising a claim request to the insurance company. It usually includes submitting the claim form, death certificate, FIR, identity proof, KYC information, and other necessary documents to the insurance company
- Exclusions: These are the list of things that are not covered under a life insurance plan in India. For instance, some insurers do not cover suicide within the first few years of the policy tenure.
Types of Life Insurance
|Types of Life Insurance Policies||Coverage|
|Term life insurance policy||Pure Risk Cover|
|Endowment life insurance policy||Insurance Cover + Saving|
|Non-Linked Participating Endowment Plan||Insurance cover + Sum Assured|
|Unit Linked Insurance Plans (ULIP)||Insurance + Investment Benefits|
|Non-participating Non-linked endowment plan||Fixed Insurance Cover|
1. Term Insurance Policy
This is the simplest type of life insurance policy. It pays your family a sum of money in case of your death, during the policy term. It does not pay anything if you survive the policy term. However the premiums on this type of policy tend to be low. For instance a monthly premium of just ₹ 1,000 can get you a life insurance cover of close to 1 crore rupees (for a 30 year old, non-smoker) for 40 years.
Explore Our Term Insurance Plan
Term plan with a range of options that you can select as per your budget.
- It fits into a tight budget^^
- Get claim payout on the first diagnosis of 34 critical illnesses (optional)*
- Accidental Death Benefit upto ₹ 2 Crore (optional)**
- Choice of 4 payout options
- Tax benefits under Section 80C, 80D & 10(10D)^
- Get covered till the age of 99 years
2. Endowment policies
Policies other than term life insurance, are called endowment policies. These can in turn be divided into participating, non-participating and unit-linked.
3. Non-Linked Participating Endowment Plan
This type of policy lets you ‘participate’ in the profits of the life insurance company and get a share of them. It pays your family a sum of money on your death but it also pays you an accumulated sum, if you survive the policy term. The survival payment or benefit is linked to the profits of the life insurance company.
4. Unit Linked Life Insurance Policy (ULIP)
This policy pays an amount on your death and a maturity amount if you survive the term. However, unlike a traditional participating policy, the maturity amount is more dependent on your investment choices rather than the profits of the life insurance company. Your policy is invested in funds and divided into ‘units’ similar to those of a mutual fund. You typically get a lot of freedom to choose the type of fund your money will be invested in.
5. Non-participating Non-linked endowment plan
A non-participating policy defines exactly how much your family will get on your death and how much you will get on the maturity of the policy. There is no variable or investment linked component. You know before-hand exactly how much you will get, in each scenario.
How does Life Insurance Policy work?
Let’s say Mr X has a 1 crore ICICI Pru iProtect Smart life insurance policy in place. He has paid insurance premiums for three years. In this example, we will take the premium as ₹ 490^^ per month which comes to ₹ 17,640 in total premiums paid. Now if he passes away in the third year, his family will get an insurance payout of ₹ 1 crore. In other words, the insurance payout will be as per the policy cover regardless of when the insured passes away in the period covered.
Tax^ Benefits of Life Insurance (Section 80C and Section 10(10D))
If you buy life insurance, you qualify for a tax deduction up to ₹ 1.5 lakh annually under section 80C of the Income Tax Act, 1961. -The payout received at the time of maturity will be tax free subject to the conditions given in Section 10(10D) of the Income Tax Act, 1961. Tax laws are subject to amendment from time to time.
| If you have any queries regarding the online purchase of our Life Insurance Plan, please give us a call on
Comparison of different types of life insurance plans
|Term Life Insurance Policy||Endowment Life Insurance Policy||Non-Linked Participating Endowment Plan||Unit Linked Insurance Plans (ULIP)||Non-Participating Non-Linked Endowment Plan|
|Overview||Used to financially protect your dependents in your absence||Used to financially secure your loved ones and build low risk savings||Used to financially secure your loved ones and build low risk savings||Used to financially secure your loved ones and create wealth as per your preferred risk type||Used to financially secure your loved ones and yourself. The death and maturity benefits are fixed|
|Maturity Benefits||No maturity benefits||Offers maturity benefits||Offers maturity benefits||Offers maturity benefits||Offers maturity benefits|
|Death Benefits||Offers death benefits||Offers death benefits||Offers death benefits||Offers death benefits||Offers death benefits|
|Purpose||Provides pure risk cover||Provides insurance cover plus low risk savings||Provides insurance cover plus low risk savings||Provides insurance cover plus investments||Provides a fixed insurance cover|
How to pick the right life insurance plan for your family?
While picking out the right life insurance plan for your family, make sure to pay attention to the following aspects:
- Claim settlement ratio: This is the number of claims that an insurance company receives in a year versus the number of claims it settles in the same year. The higher the claim settlement ratio, the more reliable is the insurer, thus there is a lower chance of your claim getting rejected
- Solvency ratio: The solvency ratio indicates the insurance company’s ability to meet its debt obligations. It gives you an insight into the insurer’s cash flow and financial health. Pick an insurer with a high solvency ratio to ensure financial security
- Premium: Affordable premiums can help you save money. Look for a life insurance plan that offers cost-effective insurance premiums
- Claim settlement process: Pick an insurance company with a simple claim settlement process. This will ensure that you and your family members do not face any hassles at the time of claim settlement
- Customer feedback: A positive customer feedback can help you gauge the insurance company’s performance and willingness to assist its customers. You can look for customer reviews online or refer to friends and colleagues for recommendations when purchasing a life insurance policy
Which is the right Life Insurance policy for you?
Well, different types of policies suit different types of people. Someone who is willing to take some risk and knows a little about investment may go in for a ULIP. Someone who only wants the protection aspect of life insurance may prefer a term insurance policy.
You can find some nifty optional features offered by ICICI Prudential iProtect Smart Term Insurance:
- Critical Illness Benefit**:This feature pays you a certain sum of money on the diagnosis of a critical illness like heart attacks and cancer. With providers such as ICICI Prudential, a defined amount is paid regardless of your actual medical expenses. This saves you the hassle of showing bills and getting reimbursed, as with medical insurance. The amount will not be demanded back from you, if you survive the illness. If your life cover exceeds the critical illness amount, the balance cover will remain intact.
- Personal Accident Benefit+: Accidents are all too common in India with our unruly traffic and tough driving conditions. This feature pays your family an additional amount if your death is due to an accident.
- Steady Income after death:Many families have a tough time managing monthly expenses after death. Hence, companies like ICICI Prudential Life Insurance give you the option of giving your family a steady income after your death rather than a lump sum which they may have difficulty managing.
You can choose all or any of these options depending on what is offered to you by the life insurance company.
How much Life Insurance Cover do I need?
- Early Adulthood: 20 – 30 years: At this stage in your life, you can pick a life insurance policy with a sum assured that is at least 10 times1 your annual salary plus your outstanding loans. Such a sum will help your family in your absence and also beat inflation
- Middle Adulthood: 30 – 45 years: At this stage in your life, you would likely be married and have children. Hence, you must consider your children’s and spouse’s needs when picking out a life insurance plan. Take into account the future education costs and inflation and try to opt for a life cover that is at least 15 times your annual salary plus your outstanding loans
- Mature Adulthood: 35 – 45 years: Your children will most likely be starting college in a few years at this age. Hence, you must account for their graduation, post-graduation, and marriage expenses. Try to opt for a life cover that is 15 – 20 times your annual salary plus your outstanding loans
- Late Adulthood: 45 to 55: Since your financial responsibilities towards your children are likely to be less in retirement, you can opt for a life cover at least 10 times your annual salary plus your outstanding loans
Factors that affect life insurance premium
Your life insurance premium depends on several factors. The main factors contributing towards the calculation of life insurance premium include your age, the type of coverage you are opting for, the amount of coverage, and personal factors such as smoking status, occupational status, etc.
What are the advantages of buying a life insurance plan online vs. offline?
When you buy life insurance online, you get the following advantages:
1. Cost efficiency: You may get an online discount when you buy online.
2. Convenience: You can buy insurance from the comfort of your house.
3. Customization: With several optional benefits available, you can customize your insurance policy as per your needs.
4. Customer support: When you buy a policy online, you have access to the customer support round the clock.
What are the payout options available for ICICI Pru Life Insurance Plans?
ICICI Pru Life Insurance Plans like ICICI Pru iProtect Smart offer flexible payout options that cater to every type of policyholder. You can choose from 4 payout options. These are:
Lump-sum:The agreed life cover is paid as a fixed amount to the nominee in case of policyholder’s unfortunate death.
Income: This option provides claim payout in equal monthly installments so that family’s monthly financial needs are taken care.
Increasing income: Your nominee will receive monthly installments for 10 years. Income amount will increase by 10% per annum simple interest every year. This option provides a 45% additional life cover.
Lump-sum plus income: The life cover gets paid in two parts as you mention during policy inception. You can choose to receive half of the amount in a lump sum manner and the rest as equal monthly installments.
Important documents to buy a life insurance policy
Here are some documents you will need to buy a life insurance plan:
- Identify proof
- Address proof
- Age proof
- Medical history/diagnosis reports
- Passport sized photographs
- Bank statements
Important documents to get your Life Insurance claim amount easily
How to file a life insurance claim?
You can file a life insurance policy claim online, at a physical branch central office, or on our central ClaimCare helpline through SMS or e-mail by following the steps given below:
- To submit an online claim, please visit the Claims section on the ICICI Prudential website
- To submit a claim via phone, please call us at our 24x7 ClaimCare helpline number at 1860 266 7766
- To submit a claim via email, please e-mail us at firstname.lastname@example.org
- To submit a claim in person, you can visit a branch near you
Claim in case of death
In case of an untimely death of the insured, the nominee can follow the steps given below to raise a life insurance policy claim:
- Inform the insurer of the unfortunate event using any one of the methods mentioned above – website, call, email, or in person
- Submit all necessary documents like the death certificate, life insurance policy certificate, hospitalisation documents, and others. KYC proofs of the nominee, like Aadhaar card, PAN card, or any other required document. FIR papers in case of suicide or accidental death, and a cancelled cheque
- The insurance company will review the documents and issue the settlement
Claim in case of maturity
You can follow the steps given below to raise a maturity claim for your life insurance plan:
- Contact the insurer using any one of the methods mentioned above – website, call, email, or in person
- Submit your life insurance policy certificate, KYC proofs like Aadhar card, pan card, or any other required document, and a cancelled cheque
- The insurance company will review the documents and issue the settlement
Life Insurance FAQs
⭐ What are the benefits of Life Insurance?
- Financial safety for family and loved ones
- High life cover at affordable premiums
- Tax benefits^^ under section 80C and section 10(10D) of Income tax act, 1961
- Tax free payout subject to condition mentioned under section 10(10D) of Income Tax Act, 1961.
- Assured income through Annuity plans
⭐ What is the Life Insurance term that I should choose?
⭐ What Life Insurance plan should I buy?
⭐ Is proceeds from Life Insurance taxable^?
Proceeds from Life insurance policy is exempt under section 10(10D) of the Income Tax Act, 1961 if:
i. Sum paid on Death except in case of a keyman policy
ii. Sum paid other than in case of Death (i.e., surrender/partial withdrawal/maturity), if
- For policy issued between April 1, 2003 to March 31, 2012: if Premium does not exceed 20% of Sum Assured (SA to premium is 5 times or more)
- For policy issued post March 31, 2012: if Premium does not exceed 10% of Sum Assured (SA to premium is 10 times or more)
⭐ Should I buy Life Insurance?
You should buy life insurance if you meet any of the following:
- Have financial dependents
- Are beginning a family
- Have a mortgage or other significant debt/loan
- Are part of a non-child working couple family structure
- Have children
- Have specific long-term financial goals
⭐ What is the “Sabse Pehle Life Insurance” campaign?
⭐ Why would a life insurance claim be denied?
⭐ How long does life insurance take to payout?
⭐ Is life insurance necessary for senior citizens?
⭐ What is the minimum & maximum age to buy Life Insurance?
⭐ Can a minor be appointed as Nominee in life insurance?
⭐ When can I start to pay the life insurance premiums?
⭐ What if I do not pay my premium on time?
If you do not pay your premium on time, you will get a grace period of 15 – 30 days, during which you can pay the premium and keep your life insurance policy active. If you pay the premium, your policy will be reinstated. However, if you do not pay the premium, your policy will be deactivated and you will lose all the benefits of the life insurance plan.
If your plan has a paid-up value and you have paid premiums for a certain period as specified in the policy document, your policy will not be discontinued. In this case, your nominee will receive the paid-up value at the time of death and not the entire sum assured.
⭐ Will I have to pay tax on my life insurance policy's maturity benefit?
⭐ What is the average life insurance payout?
⭐ Can life insurance policy payouts be claimed before death?
Yes, depending upon the kind of life insurance policy you invest in, you can claim some part of the payout before death. For instance, a life insurance plan, such as the unit-linked insurance plan, has a lock-in period of 5 years. Post the lock-in period, you can withdraw funds partially for short term needs. Endowment plans also offer a loan facility after your policy acquires a surrender value. A term insurance plan, on the other hand, may not offer such a facility.
Hence, claims before death would depend on the type of life insurance product you choose.
⭐ What do you mean by paid-up value in life insurance?
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