What is Life Insurance and how is it helpful?
Life insurance offers many benefits, which is why is it considered to be one of the most important financial tools for an individual. It gives you a chance to build wealth and provides your loved ones with financial security in your absence. Life insurance also offers you different opportunities to invest while taking care of your retirement needs.
Read on to know more benefits of life insurance:
- Term Insurance: Term insurance plans provide life cover to protect your loved ones at most affordable rates. This is the simplest form of life insurance. Term plans offer financial security to your loved ones’ future even in your absence.
- ULIP: Unit linked insurance plans, better known as ULIPs, combines life insurance with financial investment. Unit-linked insurance plans offer a wide choice of fund options and portfolio strategies. ULIPs allow you to withdraw money regularly from your policy after 5 years lock-in.
- Endowment Plan: Traditional savings insurance plans are risk-free investment plans that also offer insurance shield. Better known as endowment and money back policies, traditional plan returns are not linked to the stock market, and hence carry lower risk. Traditional insurance plans offer bonus, such as reversionary bonus and terminal bonus, for staying invested, which enhances the maturity sum.
- Savings Plan: Savings Plans are life insurance plans that combine the benefits of a life insurance cover and investment. So, in addition to securing yourself and your family, you also create a corpus to meet your financial goals at every life stage. Most protection and savings plans usually offer you a fixed amount as Maturity Benefit when the policy ends, but some specific plans also help you create a regular stream of income throughout your policy duration
- Whole Life Insurance Plan: Whole Life Insurance Plan cover you up till 99 years of age. They are different from ordinary insurance policies which have a defined term of say 10, 20 or 30 years, and are of use when you have financial dependents for a relatively long period, possibly your entire life.
- Retirement and Pension Plan: Retirement insurance plans offer ways to build your own pension income. You can either choose to accumulate your retirement corpus as per your risk appetite, or get guaranteed immediate income for life by investing a lump sum.
Why life insurance is a crucial part of any sound financial plan?
What are the benefits of having Life Insurance?
The various benefits of having life insurance are as follows:
- Peace of Mind/ Financial Security - Having life insurance provides the ultimate peace of mind. This is because if someone were to meet with their demise, they know their family and loved ones will have a financial safety net. All of us have some financial liabilities, but an adequate life insurance cover ensures that your debts or loved ones will be financially taken care of in the event of your death
- Wealth Creation - Some life insurance plans also offer you the opportunity to create wealth. Apart from life cover, these policies invest your premium in different investment classes to deliver superior risk-adjusted returns that beat inflation and grow your corpus. For example, 30-year old male investing ₹ 20,000 per month for 20 years in ICICI Pru Signature (ULIP Plan)# can get ₹ 65.39 Lakhs at 4% annual return or ₹ 1 crore at 8% annual return*
- Tax Savings - Life insurance plans offer dual tax benefits^. The premiums paid offer tax deduction under Section 80C of the Income Tax Act. This means up to ₹ 1.5 lakh premium paid annually is deducted from your gross income, thus lowering your tax outgo. Separately, the maturity insurance plans may be entirely tax-free. This tax benefit^ is under Section 10(10D) of the Income Tax Act
- Buy Young, Save More - Life insurance plans give you the ability to lock in low premium rates while you’re young. If you buy the same policy when you are older, you will be paying a much higher premium compared to if you bought the same plan when you were younger. For example, in case of the term insurance plan ICICI Pru iProtect Smart, a 20-year old male buying a ₹ 1 crore term plan for 30 years coverage will have to pay ₹ 7404 its for a regular income payout. If they buy the same plan under the same conditions after 10 years i.e. at 30 years of age, they will pay ₹ 11,383 its for a regular income payout. If they buy it another 10 years later i.e. at 40 years of age, annual premium will be ₹ 22,972 its for a regular income payout.
- Death benefit - In the unfortunate event of the demise of the policyholder, the policy’s nominee receives the entire sum assured amount as long as the premiums have been paid in full.The sum received from the term insurance can be used by the nominee for any reason to cover a variety of expenses ranging from clearing routine bills to paying back loans, paying for children’s fees or other expenses.
How are life insurance plans suitable for your needs?
Life insurance fills financial gaps that exist in your lives. As an all-rounder product, life insurance can take care of your different financial needs at different stages of life. All you have to do is identify the need, and there is a suitable life insurance plan for you.
- Saving for children’s education - A majority of Indians fund their children’s education. On an average Indian parents spend over ₹ 12 lakh on children’s education. Thus, saving for a child's education is one of the biggest priorities for a parent.
Child insurance plans allow you to fulfil this financial need. Such policies, often in the form of a Unit Linked Insurance Plan, help grow your investments and help you secure the educational milestones of your children.
- Financial Protection in case of major illnesses/health issues - A majority of Indians spend around 70% of their income on medicines and health care. Down with a health issue such as major/critical illness, there is a high chance you will not be able to earn income during the treatment/recuperation period. But your family's financial needs will remain even if you are sick. Life insurance plans can provide financial protection during major illnesses.
Critical illness cover provides a lump sum payout on the diagnosis of a wide range of serious health related conditions. This lump sum payout is given on diagnosis only. Hence, there is no need to submit bills and patiently wait for claims after undergoing treatment. Critical illness plans give you money that you can spend on your treatment, and fund your household during your no-income period as you undergo treatment. There is no restriction on how you use the claim money.
- Retirement planning - Retirement is supposed to be this beautiful time when you are free from work pressures and life is peaceful. It can be all those things and much more, if you have a pension/monthly income. Most of us work in private sector companies, and hence there is no pension benefit. This is why retirement becomes more of a worry than something to look forward to. Fortunately, life insurance provides retirement plans that allow you to earn a pension, keep your head high and live your life in your own terms.
Retirement plans offer you and your spouse the benefit of receiving regular pension for life. If you start saving for retirement from an early age, saving a big retirement corpus is possible with a retirement plan. For that, consider your post-retirement financial requirements to build an adequate retirement kitty that will suit your old-age needs. With proper planning and saving through a retirement plan, you will be able to build a good retirement corpus, which can be used to buy a fixed pension plan for life and thus protecting yourself from inflation. For example, a 60 year old has invested Rs. 1 crore in ICICI Pru Guranteed Pension Plan – Immediate Annuity, He can get upto Rs. 7.64 lakhs annually i.e. Rs. 63,724/- per month, for life.
1. Will I receive any returns when my life insurance policy reaches maturity?
Different types of life insurance policies provide various life insurance benefits upon maturity. While a standard life insurance policy does not offer any return at maturity, a plan with the return of premium option refunds the premiums paid over the policy term if the insured survives the policy tenure.
Annuity plans, endowment plans, Unit-Linked Insurance Plans (ULIPs) and guaranteed income plans also provide a maturity benefit. These can differ for different policies depending on the plan’s feature.
2. What are riders?
Riders are optional add-ons to your life insurance policy that provide additional coverage beyond the primary death benefit. Some common riders include Accidental Death Benefit, Permanent and Partial Disability Rider, Critical Illness Rider, Waiver of Premium, Income Benefit, and Terminal Illness Rider. These add-ons offer you and your loved ones enhanced and tailored financial protection. While riders provide additional coverage, it is essential to consider and budget for the associated expenses. Each rider may have its own premium.
3. How many riders can I add to my policy?
The number of riders you can add depends on your specific policy type and terms. Common riders include Accidental Death Benefit, Permanent and Partial Disability Benefit, Critical Illness Benefit, Waiver of Premium, Income Benefit and Terminal Illness Rider. You should also factor in the costs of adding riders. Riders can be added to the base coverage at an extra cost.
4. Are there any life insurance benefits for women?
Yes, regardless of income and employment status, women can take life insurance. Both working professionals and homemakers can purchase life insurance coverage. This ensures financial protection for their family in case of unforeseen events. It also offers peace of mind and support for their loved one's future financial needs.
5. What are the life insurance benefits for senior citizens?
Life insurance for senior citizens provides financial security for their families by ensuring a lump sum payout to their loved ones. Additionally, policies like annuity plans and guaranteed income plans can provide additional life insurance benefits, such as a stable income in retirement. This brings peace of mind and financial security to senior citizens and helps them live a comfortable life free from financial worries.
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#In ULIPS, the investment risk in the investment portfolio is borne by the policyholder
^Tax benefits under the respective policies are subject to conditions under Section 80C, 80D, 10(10D) and provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time.
* assumed rate of return. For the purpose of illustration, the Company has assumed 8% and 4% as rates of investment returns. The returns shown in the illustration are not guaranteed and they are not the upper or lower limits that you may get. As the value of the policy depends on a number of factors including future investment performance
ICICI Pru iProtect Smart UIN -
ICICI Pru Immediate Annuity UIN -
ICICI Pru Signature: UIN: 105L177V06