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Life Insurance

Life Insurance is a financial cover for a contingency linked with human life, like death, disability, accident, retirement etc. Human life is subject to risks of death and disability due to natural and accidental causes. When human life is lost or a person is disabled permanently or temporarily, there is loss of income to the household.Though human life cannot be valued, a monetary sum could be determined based on the loss of income in future years. Hence, in life insurance, the Sum Assured ( or the amount guaranteed to be paid in the event of a loss) is by way of a benefit. Life Insurance products provide a definite amount of money in case the life insured dies during the term of the policy or becomes disabled on account of an accident.


Why you should buy Life Insurance?

All of us face the following risks:

Dying too soon

Living too long

Life Insurance is needed to ensure that your immediate family has some financial support in the event of your demise, to finance your childrens education and other needs to have a savings plan for the future so that you have a constant source of income after retirement to ensure that you have extra income when your earnings are reduced due to serious illness or accident to provide for other financial contingencies and life style requirements.


Who needs Life Insurance ?

Primarily, anyone who has a family to support and is an income earner needs Life Insurance. In view of the economic value of their contribution to the family, housewives too need life insurance cover, even children can be considered for life insurance in view of their future income potential being at risk.


How much Life Insurance is needed?

The amount of Life Insurance coverage you need will depend on many factors such as:

How many dependants you have Whether you have any debts or mortgages?

What kind of lifestyle you want to provide for your family ?

How much you need for your childrens education?

What your investment needs are ?

What your affordability is?

You should seek the help of an insurance agent or broker to understand your insurance needs and suggest the right type of cover Kinds of Life Insurance Policies


Term Insurance

You can choose to have protection for a set period of time with Term Insurance. In the event of death or total and Permanent Disability if the benefit is offered), your dependants will be paid a benefit. In term Insurance, no benefit is normally payable if the life assured survives the term.


Whole Life Insurance

With whole life insurance, you are guaranteed lifelong protection. Whole life insurance pays out a death benefit so you can be assured that your family is protected against financial loss that can happen after your death. It is also an ideal way of creating an estate for your heirs as an inheritance.


Endowment Policy

An Endowment Policy is a savings linked insurance policy with a specific maturity date. Should an unfortunate event by way of death or disability occur to you during the period, the Sum Assured will be paid to your beneficiaries. On your surviving the term, the maturity proceeds on the policy become payable.


Money back plans or cash back plans

Under this plan, certain percent of the sum assured is returned to the insured person periodically as survival benefit. On the expiry of the term, the balance amount is paid as maturity value. The life risk may be covered for the full sum assured during the term of the policy irrespective of the survival benefits paid.


Children Policies

These types of policies are taken on the life of the parent/children for the benefit of the child. By such policy the parent can plan to get funds when the child attains various stages in life. Some insurers offer waiver of premiums in case of unfortunate death of the parent/proposer during the term of the policy.


Annuity (Pension) Plans

When an employee retires he no longer gets his salary while his need for a regular income continues. Retirement benefits like Provident Fund and gratuity are paid in lump sum which are often spent too quickly or not invested prudently with the result that the employee finds himself without regular income in his post - retirement days. Pension is therefore an ideal method of retirement provision because the benefit is in the form of regular income. It is wise to provide for old age, when we have regular income during our earning period to take care of rainy days. Financial independence during old age is a must for everybody.. There are two types of annuities (pension plans).

• Immediate Annuity

In case of immediate Annuity, the Annuity payment from the Insurance Company starts immediately. Purchase price (premium) for immediate Annuity is to be paid in Iumpsum in one installment only. 

• Deferred Annuity

Under deferred Annuity policy, the person pays regular contributions to the Insurance Company, till the vesting age/vesting date. He has the option to pay as single premium also. The fund will accumulate with interest and fund will be available on the vesting date. The insurance company will take care of the investment of funds and the policyholder has the option to encash 1/3rd of this corpus fund on the vesting age / vesting date tax free. The balance amount of 2/3rd of the fund will be utilized for purchase of Annuity (pension) to the Annuitant.


Unit Linked Insurance Policy

Unit Linked Insurance Policies (ULIPs) offer a combination of investment and protection and allow you the flexibility and choice on how your premiums are invested. IN UNIT LINKED PLANS, THE INVESTMENT RISK PORTFOLIO IS BORNE BY YOU AS YOU ARE THE INVESTOR typically, the policy will provide you with a choice of funds in which you may invest. You also have the flexibility to switch between different funds during the life of the policy. The value of a ULIP is linked to the prevailing value of units you have invested in the fund, which in turn depends on the funds performance. In the event of death or permanent disability, the policy will provide the Sum Assured (to the extent you are covered) so that you can take comfort in knowing that your family is protected from sudden financial loss. A ULIP has varying degrees of risk and rewards. There are various charges applicable for Unit Linked Policies and the balance amount out of the premium is only invested in the fund/funds chosen by you. It is important to ask your insurer or agent or broker questions to understand the sum total of charges that you have to incur. It is important to assess your risk appetite and investment horizon before deciding to buy a ULIP policy. You must also read the terms and conditions of the policy carefully to understand the features of the policy including the lock-in period, surrender value, surrender charges etc. All the types of plans mentioned above can be offered under ULIP plans. 


 How to Select the Right Insurer?

By now you must be aware of the various types of insuranceproducts available to suit your insurance needs. And now going a step forward, it becomes crucial to assess from which insurer one should buy an insurance plan. Mind you its quite a difficult decision to make. But assessing the factors mentioned below will enable you to insure yourself with the right insurer.


Promoters background:

While some may find it unnecessary to do a check on this, but in our opinion knowing thehistory / background of your insurer, is utmost important, before you buy insurance.Remember, the insurer indemnifies you against the risk, which you face, and hence assessing the promoters background and their philosophy becomes very crucial. While planning your insurance, one wants to buy peace of mind, and not face the bother whether the insurance company would settle the claims or not. Hence, understanding the value systems through the insurance companys mission statement is important.

Number of years of existence:

Well, it is always said that experience counts and in our opinion too it does! It is imperative to go with season players (insurers) rather than the one who are relatively new entrants in the business of insurance. While evaluating new entrants, it becomes vital to analyse the streams of other businesses operated by the promoters and their success rates along with ethics while operating such businesses.

Financial Background:

Also just having a fantastic value system and good number of years of existence, but not having the financial strength to back it, would also not do good when it comes to settling claims. What is required is robust financial muscle, which will lead to better claim satisfaction. You dont require a toothless tiger. A well‐established insurance company with a proven track record is in a better position to give you that extra bit of peace of mind. But then you would ask what parameters should one check in order to gauge the financial strength? Well you may take help of some of the parameters mentioned below:

 Claim Settlement Ratio (CSR):

It is very vital to check the CSR, if you are looking for peace of mind while buying insurance, rather simply buying insurance from any insurer. This ratio will help you assess the percentage of claims settled, against the total claims lodged with the insurer. While doing this study, it also becomes imperative to know the claim settlement procedure, from your insurer or the insurance agents, and assess whether you arecomfortable with same. And it is important to note that your honesty also pays – one should not disclose any mendacious information while filling in the form. One may escape the underwriters eye at the initial stage of getting the policy, but this would back fire on you while settling your claims, as the underwriter might put down his foot on some issues which do not satisfy the underwriting provision of the insurer. So, a low CSR may not always reveal the financial weakness of the insurer.

􀂙 Solvency Ratio:

This ratio reveals the strength in the balance sheet of the insurance company. The solvency ratio reveals the capability of settling claims, taking into account the net worth of the insurer, as it also takes into account the reserves and surplus held by the insurer.

􀂙 Profitability ratio:

This ratio reveals whether the insurance company generates enough income for its stakeholders after meeting all the expenses (both operating as well as nonoperating expenses). While profitability, may not appear as important as the claim settlement and solvency ratio, but needs to be gauged to ensure the efficiency and effectiveness with which the insurance company is run

Remember, only when the business is profitable, the promoters find prudence in continuing with the same.

Reading the devil in the fine print:

Merely trusting, what your insurance agent says and signing (an insurance form) like a Bollywood or Hollywood star will not do much good to you in the long run. It is imperative that you read all the relevant insurance documents, rather than dumping them in some corner of your house or office.

The devil in the fine can also roar a big “NO” during times of settling claims, as there may be several exclusions which may be a part of the policy which intend buying

How to select the right insurance advisor?

Now that you are aware of the need for insurance planning and check points to keep in mind while buying insurance, lets move on to decide from whom you should buy insurance.

Before buying an insurance policy from any insurance agent disturbing your afternoon sleep (through a phone call), please recognize that an “ideal insurance agent” is equally important as selecting an insurance policy. This is because he can assure you piece of mind (for the services which he offers), along with the risk cover (insurance), which you may have already decided to buy.

While one may talk about referral from a friend, it may not always be the right thing to do, as your friend may not know that he has been cheated by his insurance agent.

Please recognize that following factors will go a long way in select an ideal insurance agent:


Yes, this is the first and the most vital point one must consider while selecting an “ideal agent”. Your agents credentials will be judged on the basis of his

• Quality of knowledge

• Quality of service

Please assess the knowledge of your agent through the prudence which he shows, while advising you the right insurance, through a need based approach as learnt above. Dont just get lured by some fancy projections made by the agent, which will fill his pockets through hefty commission which he earns, as this may make you poorer as you pay high unwanted premiums.

Also ascertain his level of product knowledge; and the best way to do that is by doing your homework on the products.

Another noteworthy point is, prefer an insurance agent who can give you the right after sale service. Please note the quality of service comes through the years of experience your agent carries. A well‐established agent is always preferred to get the advantage of both right insurance planning and after sale service.

Multiple insurance companies:

It is noteworthy that an individual agent can take agency in only one particular insurance company, whereas an insurance broker can tie‐up with multiple insurance companies. In your exercise of insurance planning, where you may require schemes from different insurers. select an “insurance broker” since all the various products from different insurers will be available under one roof. This will provide you better co‐ordination in terms of accessing the service of the broker too, as they have executive who handle any client queries.

In order to do away with the self‐centric motive of higher commissions, please recognize that you got stick to your financial plan made, which suggest your insurance requirements.

Location: This pointer might seem to be miniscule in terms of other pointers but believe us it goes a long way in getting prompt solutions to your important queries. While you may be terribly busy with your daily routine, having an insurance agent in close proximity to where you reside / work may enable you the advantage of easy accessibility in terms of the following

• Premium payments

• Urgent query handling

• Claim processing – During such time you already in trouble; and having an insurance agent in close proximity will save yourself the hassles of running around from pillar to post in the insurers office

If you are dissatisfied?

If you are dissatisfied with your insurance policy, then dont get disheartened. There is always a way out of everything and for your insurance policies as well we have some suggestions, which can surely help you to come out of such policies which create problems for you. The options to you in such cases are:

 • Cancellation of policy in Free look in period:

In case you do not agree to the term and conditions of the policy or the benefits mentioned in the policy are not as per your requirement, you can apply for the cancellation of the policy within 15 days from the day you receive your policy documents. Some companies offer extended look in period of upto 30 days.

 • Free look in period:

This is a grace period offered to you (policyholder) as per IRDA guidelines. If you do not find policys feature and benefits as per your requirement, you have option to cancel it within stipulated time. It prevents you from mis‐selling practices of agents. You will have to fill the cancellation form stating the reason of cancellation of the policy and need to submit this form along with your original policy documents to the company within free look in period. On receipt of your cancellation request and documents, company will proceed to cancel your policy and refund your premium. You will receive your premium net of some charges which company has been spent to issue the policy like stamp duty, medical charges (if you had undergone some medical test), proportionate risk premium charges (the time period for which risk cover has been offered to you). It would be better to read the product brochure thoroughly and have clarifications from your insurance planner before signing up for the policy. Make sure that benefits offered by the policy are in alignment with your requirement. All these measures will keep you away from all hassles of cancellation of policy and thus save your time, money and efforts.


Thinking of surrendering your exist policy? Read this before jumping to any


If you surrender your policy any time during the term, you will have to bear its consequences in terms of hefty charges. These charges depend upon type of plan and companys rules. In ULIP plans, cap has been fixed by IRDA on the maximum amount which can be deducted as surrender charges but in traditional (endowment / money back) plans there is still no clarity and upper limit on surrender charges. If surrender option is used, in most of the investment plans, you will end up losing your invested amount.


Feeling lost in Insurance world? We have way out for you….

Term plan:

There is no benefit in surrendering term plan as there is no maturity or surrender benefit is offered on these plans. If you feel that the existing term cover is not sufficient for you and you need more life cover as per your financial liabilities, then you should go for a new policy. You can do it with the same insurance company or with another insurance company as well.



Compare the charges involved and benefits receivable on the surrender of the policy.


Money Back:

Check your financial requirements and benefits offered by the policy. If payments under policy are in alignment with your financial goals then you should continue with your policy. Since it is a traditional plan, it will attract hefty charges on surrender and will erode even your amount invested in the plan.



Case I:

If you surrender your policy before completion of 5years of policy (i.e. lock‐in‐period), your fund value will be transferred to “Discontinued Policy Fund” and will earn a return of 3.5% p.a. You will get this amount only after completion of 5 years of policy enforcement. The amount will be paid to you after deduction of surrender charges as per the specified surrender charges table.


Case II:

If you surrender your policy after completion of 5 years of policy (i.e. lock‐in‐period), fund value will be given to you. As per new IRDA guidelines, there will be no surrender charges applicable after 5 years.


Receipt of Benefit

On Maturity

When the policy has completed its term you will get maturity benefits of the plan held by you.

Term Plan:

No maturity benefits are paid


Endowment Plan:

Sum assured plus bonuses


Money Back:

Payments at regular interval and at the maturity last installment plus bonuses, if applicable



Only fund value


On Death

If the policyholder dies during the term of the policy, then his nominee (family) will get claim amount on death.


Term Plan:

Sum assured is paid to the nominee (family) and the policy will terminate.


Endowment Plan:

Sum assured plus accumulated bonuses till date and the policy will terminate


Money Back:

Sum assured plus bonuses without deducting earlier made payments during the term of the Policy



Either fund value or sum assured whichever is higher Or In some plans both fund value plus sum assured



If you have some complaints against insurers either in respect of your policy or claims, then you can get it resolved by following the set procedure. Policyholders who have complaints against insurers are required to first approach the Grievance/Customer Complaints Cell of the concerned insurer. If you do not receive a response from insurer(s) within a reasonable period of time or are dissatisfied with the response of the company, you may approach the Grievance Cell of the IRDA.

The complaints need to be sent to the Grievance Cell of the IRDA. The Insurance Regulatory and Development Authority (IRDA) are responsible for addressing complaints filed by policyholders. Complaints against Life and Non‐life insurers are handled separately. Please note that the Grievances Cell(s) responsible for life insurance and non‐life insurance are separate.

Only cases of delay/non‐response regarding matters relating to policies and claims are taken up by the Cell with the insurers for speedy disposal. If the grievance is not redressed, insured are advised to approach the Insurance Ombudsmen.

Only complaints from the policy holders themselves or the claimants shall be entertained.

The Cell shall not entertain complaints written on behalf of policyholders by advocates or agents or any third parties.

If the communication is done over e‐mail, then the plaintiffs are requested to submit complete details of the complaint as required in the registration form. Without this, the Cell will not be in a position to register the grievance.

In case the claimant is not satisfied with decision of Ombudsmen, appeal can be filed at the appropriate judicial forum like civil courts and consumer courts.

 You can also utilize the facility of tracking your complaints and action on the complaints made by you.

For any details you can log on to:

www.irdaindia.org Or Send mail to complaints@irda.gov.in Or Dial 155255 (toll free)


Contact Information

Complaints against Nonlife Insurance Companies:

Insurance Regulatory and Development Authority

Parishrama Bhawanam, 5‐9‐58/B, Basheerbagh, Hyderabad – 500004.

(040) 23240034

e‐mail id: nonlifecomplaints@irda.gov.in


Complaints against Life Insurance Companies:

Insurance Regulatory and Development Authority

Parishrama Bhawanam, 5‐9‐58/B, Basheerbagh, Hyderabad – 500004.

(040) 66820964/66789768 Extension –251

e‐mail id: lifecomplaints@irda.gov.in

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