What is life insurance



Need for Insurance

What is life insurance?

Life insurance ensures that your family will receive financial support in your absence. Put simply, life insurance provides your family with a sum of money should something happen to you. It protects your family from financial crisis.

In addition to serving as a protective cover, life insurance acts as a flexible money-saving scheme, which empowers you to accumulate wealth-to buy a new car, get your children married and even retire comfortably. Life insurance also triples up as an ideal tax-saving scheme.

Why do I need life insurance?

Who will take care of my family if tomorrow something unfortunate happens to me?” If this question bothers you, then Life Insurance is the answer.

Of course, under any circumstances, the loss of a loved one is a traumatic experience. But, if your family is also left without sufficient money to meet basic living needs or prepare for future goals, they will have to cope with a financial crisis at the same time. A Life Insurance plan ensures that your family is financially secure even if tomorrow you are no longer around to care for them.

Today, there is no shortage of investment options for a person to choose from. Modern day investments include gold, property, fixed income instruments, mutual funds and of course, life insurance. Given the plethora of choices, it becomes imperative to make the right choice when investing your hard-earned money. Life insurance is a unique investment that helps you to meet your dual needs - saving for life's important goals, and protecting your assets.

Let us look at these unique benefits of life insurance in detail.

Asset Protection

From an investor's point of view, an investment can play two roles - asset appreciation or asset protection. While most financial instruments have the underlying benefit of asset appreciation, life insurance is unique in that it gives the customer the reassurance of asset protection, along with a strong element of asset appreciation.

The core benefit of life insurance is that the financial interests of one’s family remain protected from circumstances such as loss of income due to critical illness or death of the policyholder. Simultaneously, insurance products also have a strong inbuilt wealth creation proposition. The customer therefore benefits on two counts and life insurance occupies a unique space in the landscape of investment options available to a customer.

Goal based savings

Each of us has some goals in life for which we need to save. For a young, newly married couple, it could be buying a house. Once, they decide to start a family, the goal changes to planning for the education or marriage of their children. As one grows older, planning for one's retirement will begin to take precedence.

Clearly, as your life stage and therefore your financial goals change, the instrument in which you invest should offer corresponding benefits pertinent to the new life stage.

Life insurance is the only investment option that offers specific products tailormade for different life stages. It thus ensures that the benefits offered to the customer reflect the needs of the customer at that particular life stage, and hence ensures that the financial goals of that life stage are met.

The table below gives a general guide to the plans that are appropriate for different life stages

|Life Stage |Primary Need |Life Insurance Product |

|Young & Single |Asset creation |Wealth creation plans |

|Young & Just married |Asset creation & protection |Wealth creation and mortgage protection plans |

|Married with kids |Children's education, Asset creation |Education insurance, mortgage protection & wealth |

| |and protection |creation plans |

|Middle aged with grown up |Planning for retirement & asset |Retirement solutions & mortgage protection |

|kids |protection | |

|Across all life-stages |Health plans |Health Insurance & Tax Solutions |

How much insurance do I need?

Before buying an insurance policy, it is always important to find out the amount of life insurance cover you need. The following factors should be considered before buying a life insurance policy:

• Your age and number of dependents

• Your annual income and annual expenses

• Your outstanding liabilities like home loan, car loan, etc.

• Your investments / savings

• Your lifestyle expenses

• Monies you would require in future

As a thumb rule, it is suggested that you should have an insurance cover of around 5 to 10 times of your annual income.

Human Life Value

What is your Human Life Value?

Beyond all doubt, your life is invaluable. Yet, there is a certain worth that can be attributed to the financial support you offer your parents, spouse or children. This worth is referred to as Human Life Value (HLV). In the future, if your family does not have the protective blanket of your presence, they will no longer be able to enjoy the benefits of the income you earned. Put simply, Human Life Value is the present value of your future earnings.

Why should you calculate your Human Life Value?

You should calculate your Human Life Value so you can accordingly invest in insurance plans that provide your family with adequate finances and hence security even in your absence.

How do you determine your Human Life Value?

Your Human Life Value is determined by 3 factors:

1. Your age

2. Current and future expenses

3. Current and future income

As a thumb rule, if you are 30 years of age, you should insure yourself for an amount approximately 8 times your annual income. At 35, your investment should be close to 6 times your income. Of course, the exact amount of your investment should be determined by the number of people who depend on you, your existing investments and your life stage. For example, if you are 30 years of age and have two children and parents to provide for, the amount you invest should be reflective of your requirements.

Life stage profiler

All through your life, several significant events the birth of your child, moving to a larger home, his or her education and wedding, buying a new car, retiring from work will occur at various stages and demand your financial commitment. If you plan in advance for these events, you will quite naturally be prepared when they occur.

Life insurance is an effective tool that assists you to plan for your future such that you are financially equipped to meet all your goals.

Our special tool, the Life Stage Profiler, assists you to plan for a secure financial future. Please use the tool, right away!

Which important goals should you plan for in advance?

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Your family's protection : so that your loved ones are secure should an unfortunate event happen to you. Buying Life insurance assures that your family receives a lumpsum that safely tides them over any financial crises that might occur in your absence.

Child's education : As parent, your primary responsibility is to ensure your children's future. Our Education Insurance plans ensure your child receives money at key stages of his or her education even in your absence.

Savings : Savings plans allow you to steadily save towards a pre-decided goal in a secure manner. These plans provide you with a host of benefits. You can choose the premium, the underlying fund in which you want to invest your money, the ratio between protection and investment as per your requirements.

Retirement : Retirement plans help you secure regular income for your retired life. During the Accumulation phase, you systematically save while you are working. When you retire, the Payout stage of the plan begins. You then purchase an annuity, which will serve as a steady stream of income, for the rest of your life.

Health : An integral part for financial planning is protecting oneself against any medical emergencies as well. Hence, a very prudent decision would be to choose a combination of plans that look after your finances and offer you a protective health cover to ensure your financial planning is in track despite any major illnesses. ICICI Prudential offers 3 comprehensive benefit-based products that cover major critical illnesses.

Tax Benefits

What are the tax benefits available?

Life Insurance as a tax saving tool, offers savings under various sections of the income tax act. Some of the key tax benefits offered are as follows:

• Our life insurance plans are eligible for tax deduction under Sec. 80C.

• Our Pension plans are eligible for a tax deduction under Sec. 80CCC.

• Our health insurance plans/riders are eligible for tax deduction under Sec. 80D.

• The proceeds or withdrawals of our life insurance policies are exempt under Sec 10(10D),subject to norms prescribed in that section.

Invest in ICICI Prudential Life insurance and retirement plans and avail of these tax planning services to save tax at your year end tax planning!

Explanation of Tax Benefits

Premiums paid for Life insurance - Deduction under Section 80C

• Category of assesses allowed deduction: Individual assessee and Hindu Undivided Family assessee.

• Eligible Savings: Premiums paid or deposited by assessee to effect or to keep in force insurance on the life of following persons:

o In case of individual assessee – Himself/Herself, spouse, children of such individual

o In case of HUF assessee – any member

• 20% limit: If the amount of premium paid in a financial year for a policy is in excess of 20% of the actual capital sum assured, then deduction will be allowed only for premiums upto 20% of the sum assured.

• Limit on amount of deduction: Deduction will be restricted to investments upto Rs 100,000 in savings specified under Section 80C (including life insurance premiums). The limit of deduction under Section 80C will be part of the overall limit prescribed under Section 80CCE.

• Disallowance: This benefit will be reversed if the policy is terminated/cease to be inforce within 2 years after the date of commencement of policy.

Premiums paid for Pension plans - Section 80CCC

• Permitted Deduction: Section 80CCC allows for deduction of premiums paid under a pension scheme. As per this Section, the whole of amount paid or deposited (excluding interest or bonus accrued or credited to the assessee’s account, if any) as does not exceed the amount of Rs 100,000 is eligible for deduction from the total income.

• Receipt under Policy: Amounts received on surrender (whole/part) of annuity plan, amounts received as Pension is taxed as income.

• Limit: The limit of deduction under Section 80CCC will be part of the overall limit prescribed under Section 80CCE.

Overall deduction limit - Section 80CCE

As per this section, the maximum amount of deduction that an assessee can claim under Sections 80C, 80CCC and 80CCD will be limited to Rs 100,000.

Premiums paid for medical insurance - Section 80D

• Category of assesses allowed deduction: Individual assessee and Hindu Undivided Family assessee.

• Eligible premiums: Premiums paid by assessee by any mode other than cash out of his taxable income to effect or to keep in force an insurance on the health of following persons:

o In case of individual assessee – Himself/Herself, spouse, dependent children and parent or parents. The condition of dependency of parent has been removed from FY 2008-09. In other words, even if the parent is independent, the individual can pay the premium and claim the deduction.In case of HUF assessee – any member of HUF

Deduction and upper limit: The qualifying amounts under Section 80D for self, spouse and dependent children is upto Rs. 15,000/- and additional deduction upto Rs. 15,000/- for the parents. However, a higher amount of upto Rs 20,000/- is permitted if the person, for whose health insurance the premium was paid, was aged 65 years or more at any time during the financial year in which the premium was paid. Such amounts of premium paid would be allowed as deduction from the total income of the assessee.

Benefits under insurance policy - Section 10(10D)

As per Section 10(10D) of Income tax Act, 1961, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt from tax.

However, this rule does not apply to following amounts:

• sum received under Section 80DD(3), or

• any sum received under a Key man Insurance Policy, or

• any sum received other than as death benefit under an insurance policy which has been issued on or after April 1 2003 and if the premium paid in any of the years during the term of the policy is more than 20% of the sum assured.

Tax Rates for Individuals

The rates of income-tax for FY 2010-11

|Total Income (Rs.) |Rate of Tax |

| |Senior Citizen |Women below 65 years |Others |

|Upto Rs. 160,000 |Nil |Nil |Nil |

|Rs. 160,000 to Rs. 190,000 |Nil |Nil |10% |

|Rs. 190,000 to Rs. 240,000 |Nil |10% |10% |

|Rs. 240,000 to Rs. 500,000 |10% |10% |10% |

|Rs. 500,000 to Rs. 800,000 |20% |20% |20% |

|Above Rs. 800,000 |30% |30% |30% |

Surcharge on Income Tax: No surcharge on Income Tax for the Financial Year 2010-11 for Individuals.

Education Cess on Income Tax: Edcuation Cess @2% will be payable on the amount of income tax (including surcharge).

Secondary & Higher Education Cess on Income Tax

Additional Education Cess @1% will be payable on the amount of Income tax (Including surcharge).

3) I know I need life insurance, but cannot afford the coverage I need. Can I do anything to lower the cost?

The cost of life insurance depends on three factors: your age, health and your income. We suggest that you not compromise on the level of protection you require. You could purchase a basic protection policy that gives you the opportunity to pay only the minimum premium. You can choose this affordable policy, without any riders.

4) Where can I find more information on life insurance?

Our certified insurance advisors understand your requirements and propose the suitable life insurance policy for you. To get in touch with our advisors click here or write to us at lifeline@.

Life Insurance FAQs- Insurance, Life Insurance India, Life Insurance Company

1. NOMINATION

2. CLAIM

3. POLICY SERVICING

4. SURRENDER/PARTIAL WITHDRAWAL/ASSIGNMENT

1. Nomination 

1) What is nomination? And who is a nominee?

Nomination is a right conferred on the life insurance policyholder to appoint a person or persons to receive the policy monies in the event of the policy becoming a claim by death. Any policyholder, who is a major and the life insured under a policy, can make a nomination.

A nominee is the person designated by the policyholder to receive the proceeds of an insurance policy, upon the death of the insured.

2) Can I change my nomination?

Yes. You can change your nomination at any time till the maturity date. All you need to do is to inform us about the change through the specified form.

3) What details am I to provide about the nominee/s?

The following details are necessary when filling in the proposal form: full name of the nominee, address, age, and the relationship between you and the nominee.

4) What is the difference between nomination and assignment?

While nomination is an authorisation to receive the policy monies in the event of death of the life assured, it does not give the nominee an absolute right over the money received to the exclusion of other legal heirs. Further, the nomination can be revoked or cancelled at any time during the lifetime of the policyholder at his will and pleasure or by a subsequent assignment.

On the other hand, assignment of an insurance policy is a transfer or assignment of all rights and liabilities of the insurance policy in favour of the assignee.

2.Claim 

1) What is a Claim?

A claim is the payment made by the insurer to the insured or claimant on the occurrence of the event specified in the contract, in return for the premiums paid for the insured.

2) What parameters are considered by the company while asking the claimant to submit particular records / document?

The Company considers the Sum at risk, cause, circumstances of claim and duration of the policy while asking for certain requirements. Eg. For accidental death, specific proofs such as Post Mortem and Police Report are required whereas for death due to illness, the Company calls for records from hospital, test reports, etc

3) Once all the requirements are submitted, how much time does the Company take to settle the Claim?

The Company settles the Claim within 8 working days after all the records, documents and necessary forms are submitted and documentation is completed.

In case, the Claim warrants further verification, the Company keeps the Claimant informed of the same. Subsequently, when the decision is taken, it is communicated to the Claimant by a letter. From November 2005, we have started sending SMS Alerts to the advisor of the policy to enable the quick communication of the decision of the claimants.

4) What is IRDA?

IRDA is Insurance Regulatory Development Authority, that has been set up to protect the interests of the policy holders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. [This definition has been taken from the IRDA website]

5) What are IRDA guidelines pertaining to Claim processing?

As per IRDA (Insurance Regulatory Development Authority), the Insurance Company is required to settle a claim within 30 days of receipt of all requirements.

However, if the claim warrants further verification, the Company should complete its procedures within 6 months from receipt of written intimation of the claim. If the Company settles the claim beyond 6 months period, the interest is payable by the Company on the claim amount. The interest is payable only where the Claimant has submitted all the requirements. Further, rate and period of interest are decided as per IRDA guidelines.

6) Who is entitled to receive the Claim benefit?

• The nominee or appointee (in case of minor nominee) last recorded under the Policy in case of Policy on own life.

• The proposer in case the Policy is not on own life.

• Assignee in case the Policy was assigned.

• Life Assured himself in case of policy on own life for living benefit claims (Eg Critical Illness rider)

7) How do I make a Maturity Claim?

You must send us the:

- Completed Claim form

- Policy of life assurance

- Proof of age, if not submitted earlier

3.Policy Servicing 

1) What is the benefit of opting for riders / add-ons?

Riders / add-ons are the additional benefits that can be added to the basic old policies prior to July 1, 2006, by paying a marginal additional premium. Riders offered by us are:

a. ADBR: Accident & Disability Benefit Rider

b. ABR: Accident Benefit Rider

c. CIBR: Critical Illness Benefit Rider

d. WOPR: Waiver of Premium Rider.

e. IBR: Income Benefit Rider.

2) What is the difference between switch and redirection?

A switch will enable you to shift the existing units of your unit-linked policy into a new fund and will not change your future premium allocation.

A premium redirection will enable you to change your allocation for all the future premiums of your policy. However, your existing units will not be shifted into a new fund.

3) In case I lose my policy document how do I obtain a duplicate policy?

You will need to pay the charges towards the issue of a duplicate policy, which will also include the charges for stamp fee. We will send a ‘Duplicate Policy Request’ form that you will need to fill and send us.

4) How will the Net Asset Value (NAV) be calculated for my servicing requests?

The Net Asset Value (NAV) is applicable at the time of valuation/purchase. It is calculated as the value on the day you make a transaction request (provided it is a working day).

5) How do I notify a change in address? OR How can I change my policy details?

You have the following options:

1. Download the ‘Change Request’ form from the Download Centre section of our website, fill and send it to us.

2. Call our Customer Service Helpline numbers mentioned in the Contact Us section of the website.

3. Or write to us at the corporate address mentioned in the Contact Us section of the website.

6) How do I effect a Top- up/Fund Switch/Premium Redirection?

1. Download the appropriate form from the Download Centre section of our website, fill in and send it to your nearest ICICI Prudential Branch.

2. For Switch and premium redirection, you can login to the website with your user id and password and give your request online.

7) Can I change the frequency of payment for my policy?

Yes, you can change the premium frequency from low (annual) to a higher frequency (bi-annual or monthly) or vice-versa.

8a) What do I need to do when the life assured becomes a major?

When the life assured becomes a major, you need to submit the proof of his/her age with his/her correct date of birth. You also need to write a covering letter.

8b) Can I change the date of birth after the free look period? If yes, what are the documents required?

Yes, you can change the date of birth after the free look period. All you need to do is submit the proof of age with the correct date of birth, along with a covering letter.

9) When does a policy lapse?

A policy lapses when the policy holder fails to pay the premium even within the grace period. In this case, the policy loses all its benefits.

4.Surrender/Partial withdrawal/Assignment 

1) Can I surrender my policy?

After you pay premiums for at least three consecutive years, your policy acquires a surrender value and you can surrender the policy. If you have an ICICI Prudential single premium policy, you can surrender your policy after the first year.

2) What do I need to do to surrender my policy?

You need to submit the Payout Request Form which is available in the Download Centre section of our website. Alternatively, you can contact us at any of our contact points.

3) What is partial withdrawal?

Partial withdrawal of a policy implies withdrawal of only a part of the funds of your policy. The applicable norms for partial withdrawal may differ for every product. For product-specific details on the same, please refer to the respective product brochures that are available in the Products section of our website.

4) What are Top-ups?

Top-ups are one-time payments. You have the flexibility to make an additional investment through a top-up, which is over and above your regular premium payments. You can make a top-up at any time while your policy is in force. The applicable norms for top-ups may differ for every product. For product-specific details on the same, please refer to the product brochures available in the Products section of the website.

5) What is ‘transfer’ or ‘assignment’ of a life insurance policy?

Transfer or assignment is a method of transferring one’s transferable interest in a life insurance policy to another person or institution, for example, as a security for repayment of loans.

6) Can I assign a policy?

Yes, you can assign a policy. To assign the policy, you have to notify us regarding the assignment.

7) How do I assign a policy or transfer a life insurance policy?

Assignment or transfer of a life insurance policy may be made by simply making an endorsement to that effect in the policy document. Another way of transferring or assigning the life insurance policy is to get a separate assignment deed executed.

The former case is the preferred mode of assignment as it is exempt from further stamp duty. An assignment should be signed by the assignor or his duly authorized agent, and should specifically state the fact of transfer or assignment. The document should be attested by at least one witness.

8) Is assignment allowed on all the insurance plans?

Assignment is applicable on all insurance plans except Pension Policies and Married Women’s Property Act (MWP).

What if I am not satisfied?

Keeping our customer first approach in mind, we try to ensure that our customers are satisfied by our products and services; however, if under any circumstances, you feel that the product or services offered by us are not up to your expectations, you can select to view your queries through one of the following options:

Grevieance redressal

Call us at 1800 22 2020

If you are still not satisfied with any of our product, you have an option of canceling the policy within 15 days of receipt of the policy documents (Freelook period). Kindly refer the policy document for detailed terms and conditions on the freelook period.

1. How do I know if the agent is authorized to sell life insurance policy?

A life insurance agent is a representative of a particular life insurance company and can provide advice on the products marketed solely by that life insurance company. An agent who sells life insurance products is registered with the IRDA and is required to pass a pre-contract examination, conducted by the Insurance Institute of India. Always insist on seeing agent's authorization card issued by IRDA, before interacting with them.

How does a life insurance company evaluate my risks?

The risk class or mortality of a policyholder is determined by an underwriting process through which a life insurance company would decide whether or not to accept a risk. The risk of death is determined by several factors such as age, sex, habits, personal and medical history, occupation, etc. The life insurance company's decision to insure your life is based on the information provided in the application form, the medical examination report (if required) etc. Be truthful whilst filling in your form so that the life insurance company can be fair in its assessment of the risks involved.

4. What will happen to my policy if I fail to pay my premium on time?

The policy contract provides for a 'grace period', which gives the policyholder an additional period of time after the due date for the payment of the premium. During this period, you can still pay your premium and the life policy still continues to be in force. For monthly mode of payment, the grace period is usually 15 days, while for other frequency of payments (semi-annually or annually), it is usually 30 days. When your life insurance policy has lapsed, you may revive or reinstate it to full force within a period of time and under certain conditions such as declaration of your state of health at the time of reinstatement.

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6. Should I cancel my existing policy and replace it with another?

Since buying a life insurance policy is a long-term commitment, it is not advisable to terminate your policy early as you will not receive the total amount of premium that you have paid because the surrender value is usually less than what you have paid. Replacing an existing policy with another is not in your best interest because the new policy is likely to be at a higher premium as you are older. There will also be an initial cost of writing the life insurance policy for a second time. Additionally, the two-year period of contestability will begin again. Furthermore, the present life insurance company can often make the changes that you want at lower cost to you.

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8. Is a life insurance sales illustration a legal document, like a contract?

A sales illustration is not a legal document. Legal obligations of a life insurance policy are spelled out in the policy itself. Therefore, a policyholder must read the fine print of the contract carefully to ensure that he/she understands the exact nature of the policy, the risks that are covered as well as the limits or exclusion clauses, before signing the contract.

9. Should I pay my premiums through the agent?

You have the option of paying the premiums directly to the insurance company or through the agent. If you choose to pay through the agent, you must ensure that the cheque is written in the name of the insurance company. You must also ensure that you receive the receipt from the insurance company.

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