Life Insurance can broadly be categorised as term, money back or unit linked.
Term insurance provides cover over a predetermined span of time, with a fixed rate of premium. It is the most basic, plain and inexpensive method of insurance. But while the premiums are the cheapest, the insured persons get nothing back in their lifetime, with a payout to the beneficiary happening only in the event of death.
Endowment policies also provide cover for a fixed period. However, while they will also pay out the sum assured in the event of death, they will give the policyholder some returns periodically or at the time of maturity. Naturally, the premiums are substantially higher.
ULIP or Unit Linked Insurance Plan is a happy balance between insurance and investment. In a sense, it is like a Mutual Fund where the value of the policy varies according to the NAV. ULIPs invest in equity and/or debt. ULIP is an excellent future-planning tool.
Currently, premium paid on certain Life Insurance policies are also tax-deductable under Section 80C. Which makes it all the more lucrative to take insurance.
The four basic investment objectives of insurance are Protection, Retirement Planning, Savings and Child Plans.
Before choosing an insurance plan, one should take into consideration factors such as age and future objectives. For example, term insurance is best suited to someone of a younger age and a lower income. Middle age merits a mix of term, endowment and ULIP to ensure sufficient cover as well as long-term investment. Child Plans are an excellent tool to take care of future events such as education and marriage.
The settlement of a claim arises due to Death of the Policyholder or due to Maturity of the Policy.
- If the life insured survives to the full term, then basic sum assured is payable. This payment by the insurer to the insured on the date of maturity is called maturity payment.
- In majority of the plans, full sum assured becomes payable along with Bonus as a maturity payment, unless survivals benefits are paid earlier as in a money back policy
- At least 2 months before maturity date, information is sent to the life assured with a blank discharge form for signature & completion by him. It is to be returned to the office along with -
- Original Policy document
- Age proof if age not already submitted
- Assignment /reassignment, if any
- Postdated cheques are submitted to the Life Insured on receipt of the above mentioned requirements
- In respect of a death claim an intimation regarding death of a policyholder from a relative/nominee/or assignee is to be received. The facts required to be submitted are -
- Date of death,
- Reason and Place of Death
- Full details of policies held by the Life assured should also be submitted.
- Can be done at the inception of the Policy by providing details of nominee in the proposal form. However, if the nomination is not given at the beginning, the policyholder can give it at a later date. This nomination has to be effected by giving notice in a prescribed form to the insurer and getting it endorsed on.