Here are 10 FAQs on life insurance in India:
1. What is life insurance and why do I need it?
Life insurance is a contract between you (the policyholder) and an insurance company. You pay premiums, and in exchange, the insurer promises to pay a lump sum (the death benefit) to your beneficiaries upon your death. This offers financial security to your loved ones in your absence.
2. What are the different types of life insurance plans available in India?
Term Insurance: Provides coverage for a specific period; if death occurs within the term, the benefit is paid. It’s the most affordable form of life insurance
Endowment Plans: Combine insurance coverage with savings. They pay the benefit on death or at policy maturity.
Whole Life Insurance: Provides coverage for your entire lifetime, with premiums typically higher than term plans.
ULIPs (Unit Linked Insurance Plans): Offer both insurance and investment components, with a portion of the premium invested in market-linked instruments.
3. How much life insurance cover do I need?
A common rule is to have a cover of at least 10-15 times your annual income. Consider your debts, dependents’ expenses, and future financial goals when deciding.
4. What factors affect my life insurance premium?
Age: Younger people usually pay lower premiums.
Health: Good health generally results in lower premiums.
Smoker/Non-smoker: Smokers usually pay higher premiums.
Occupation: Those in high-risk jobs might pay more.
Sum Assured: The higher the death benefit, the higher the premium.
5. What is the difference between LIC and private life insurers?
LIC (Life Insurance Corporation) is the government-owned insurer with the longest history in India. Private insurers offer more product variety and may have different underwriting criteria.
6. What are riders in life insurance and do I need them?
Riders are additional benefits that can be attached to your policy, like accidental death cover, disability cover, or critical illness cover. It depends on your specific needs and affordability.
7. Can I get tax benefits on my life insurance premiums?
Yes, premiums paid for life insurance policies qualify for tax deductions under Section 80C of the Income Tax Act, up to a limit of INR 1.5 lakhs annually.
8. What is the claim settlement process for life insurance?
Your nominee needs to inform the insurer of your death with relevant documents (death certificate, policy papers). The insurer reviews the claim and pays the nominee if approved.
9. What is the meaning of ‘medical underwriting’ in life insurance?
Medical underwriting is the process the insurer uses to assess your health and risk profile. You may need to go through a medical exam and answer questionnaires about your health history.
10. How do I choose the right life insurance policy?
Consider your needs, budget, and the insurer’s claim settlement ratio. Seek advice from an insurance agent and compare plans from different insurers before buying.
