Life Insurance Policy – Can You Afford To Ignore These Points Before Choosing One



Life insurance policy is an essential aspect in modern civilized world. It ensures a financial protection for those who need you and who might perish if something unforeseen happens to your life. May God forbid but in the event of such an accident life insurance company ensures existence of your family members viz. children, wife, parents by providing them ample cash as per agreement of the policy.

Even if something fatal doesn’t happen to you and you remain healthy during the term of the policy, you will get the assured sum as mentioned in the policy along with bonus. In India these policies are called ‘endowment policy’. Getting a lump sum amount at the time of retirement is quite useful for any person. Therefore, having a life insurance policy is also an excellent decision from the point of view of investment and savings. 

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Acquiring a life insurance policy that suits your needs best is an important job. It involves a lot of thinking and planning. It is very important to consider certain points before acquiring a life insurance policy. First of all, you have to consider the cost it involves i.e. the total amount of premium throughout the tenure of the policy.

All insurance companies offer various types of policies that serve the need of different types of customers. You have to think well whether the amount of premium is within your capacity failing which the policy may lapse and the amount of premium already paid might become a total loss.

Next important part to think over is how much money or coverage your family will need in your absence for their reasonable survival and whether it is enough for your children to continue their education till they are grown up and stand on their own feet. If the number of family members dependent on you is less then you need a less cover. The more the number of dependent family members the more cover you need. The more the ‘assured sum’ of the policy the higher the premium.

It is always advisable to obtain a life insurance policy at the start of your career at an early age as it involves longer tenure or maturity period of the policy like 25 to 30 years and always involves smaller amount of premium which doesn’t become a burden on your pocket.

Never conceal important points like habit of smoking, medical history or other issues in the ‘declaration page’ of the ‘application form’. These things are really important for the ‘life insurance company’ to decide whether your proposal for a ‘life insurance cover’ will be accepted or not. If you have a motor cycle or car, try to behave like a good driver.

Nowadays, life insurance companies check your automobile papers viz licence/registration papers to find out the number of accidents you were involved in the past. Because habit of rash driving may shorten your life any time and accepting a proposal for a ‘life cover’ from such a person becomes really risky.  

Read all the conditions of the policy agreement carefully and try to make out if all the benefits as claimed by the company or the broker are included therein or something is missing. As the amount of premium to be paid by you over a long period, involves a substantial amount of investment, you must be 100 per cent confident that there will be no hurdle in your way to get the sum assured at the time of maturity or by your nominees in case something fatal happens to you.

If you are covered under a cost free life insurance or group insurance provided by your employer, still having an additional policy is a good choice.
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There are 3 types of policies generally available in India :-

Endowment Plan

  • Death Benefit : In case of death of the ‘Assured’ during the term of the policy the sum assured in the policy along with vested simple bonus and final additional bonus is payable provided all due premiums have been paid.

  • Maturity Benefit : On survival till the end of the ‘policy term’ the sum assured along with vested simple bonus and final additional bonus is payable provided all due premiums have been paid. 

Money Back PlansUnder this plan, a fixed part of the policy amount is payable at the end of a specific period as mentioned in the policy document. Suppose, in case of a policy of Rs..200.000/ for a maturity period of 20 years – 20 per cent of the ‘Assured Sum’ i.e. Rs.40.000/ shall be paid at the end of 5th, 10th and 15th year and the balance 40 per cent i.e. Rs.80.000/ along with vested bonus and final bonus shall be paid on maturity.

  • Death Benefit : On death during the policy term, the **‘Assured Amount’ along with all the bonuses shall be payable provided the policy is in force and all the premiums have been paid. 

  • Maturity Benefit : On survival till the end of the ‘policy term’ balance 40 per cent of the ‘sum assured’ along with vested simple bonus and final additional bonus shall be payable.

Term Assurance Plans It is a protection plan which ensures protection to the family in case of unfortunate death. 

    • Death Benefit : In case of unfortunate demise of the ‘Assured’ during the term of the policy the ‘sum assured’ shall be payable.

    • Maturity Benefit : On survival till the end of the policy term, no amount shall be payable.

    Definitions :-

    Assured : Life Assured or Insured is the person(s) whose life is covered in the insurance contract.

      Assured Amount is the amount as mentioned in the original policy contract that shall be payable on death of the Assured. 

      Nominee is a person(s) who will get the ‘Assured Amount’ on death of the ‘Assured’. According to experts a nominee may be a person(s) who by definition can be immediate family members like wife, children, parents and also relatives, close intimate family friends, orphans, orphanages and people who are loyal and close to the ‘Life Insurance Policy Holder