Individual Life Insurance

The good news today is that you can take out your life insurance policy of your choice by accessing the insurer’s website. Gone are the days when you had to depend on your local agent to get life cover.

Ever since the government of India liberalized the insurance sector by allowing competition in December 2000, the market has grown by leaps and bounds as a result of deeper penetration made by the newer companies. The Life Insurance Corporation of India however, is still the market leader.

Life insurance is a means of protecting your family and dependents in the event of your death. By saving at regular intervals, you not only take giant steps toward protecting your family, but also get access to loans against your insurance policy to meet your fund requirements in case of an emergency. Besides, you get the survival benefit if your policy matures during your lifetime. This amount would include the sum assured plus accrued bonus, if applicable.

There are three parties to a life insurance contract. The insurer is the company which provides life cover. The insured is the person entitled to benefits under the policy. The owner is the person who takes out a policy for the benefit of another person- a spouse or a child.

Basically, life insurance can be either a whole life policy or a term life policy. In the case of the former, the insured is covered for life and runs as long as the insured is alive. In the case of the latter, the risk cover ends with completion of the term which could be 10, 20, 30 years or more.

Life insurance is intended to encourage savings by individuals at regular intervals. The government of India allows tax rebates to the extent of premium paid in a year as per applicable income tax and wealth tax provisions.

The amount of insurance cover you should take would depend on your standard of living, and your disposable income. If you overstretch, you end up losing benefits of long term cover once you discontinue payment of premium. Remember, those who start early stand to gain the most. Insurance gets costlier and more complicated as you grow in age.

Assume, your yearly income is Rs 600,000. For the replacement income of Rs 600,000 per year you would require at least a policy payout of Rs 4,800,000 at interest rate of 8 per cent per annum on the assumption that you have no other sources of income. The amount of insurance cover you need to take to ensure this payout can be easily found out from the insurer.

Information on insurance policies is now easily available and you can choose a policy which suits you best. Buyers of life insurance should take care to make proper disclosures at the time of taking out a policy. Any non-disclosure or fraud makes the contract null and void even after acceptance of the risk by the insurer. It is also important to bear in mind that a life insurance policy is a family protection scheme and you have not done your job unless you appoint a nominee to receive maturity benefits in the event of your death.

Life insurance is desirable but not a necessity. If you have accumulated enough savings to enjoy a comfortable life and have no dependent’s future to worry about, you lose nothing by not having a life insurance cover.