Glossary
1. 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
• What kind of lifestyle you want to provide for your family
• How much you need for your children’s education
• What your investment needs are
• What your affordability is
2. What is premium?
Premium is the amount of money you have to pay to continue your insurance coverage.
The premium amount depends upon
• Your age
• Policy selected
• Mode of premium payment
• Term of premium payment
• Term of the policy
3. What is term in life insurance?
Term is the number of years you choose to insure yourself.
The longer the term the lower the premium. Policy terms vary from a single year to a maximum of 55 years. Not all policies offer you a range of terms.
4. What is Sum Assured?
The amount of insurance cover you have or the minimum amount your family receivesin the event of your demise.
Your family could get more than this amount based on the type of policy or riders that you select.
5. What is Survival Benefit?
Survival Benefit is the amount of money received at pre-fixed, regular intervals by the insured person, upon survival of the term of the policy.
Often, money received upon maturity or at the end of the term of the policy is also referred to as Survival benefit.
6. What is Maturity Benefit?
It is the amount of money received by the insured, upon survival of the term of the policy.
7. What is Insurance cover or Death Benefit?
Insurance Cover or death benefit is the amount of money the nominee receives from the insurance company upon the insured’s death. In addition to the sum assured, this would include the bonus, if any.
8. What is “Waiver of Premium”?
Waiver of premium is an additional clause in an insurance policy which waves the premium of policyholder for the time he is seriously ill or disabled. This feature is however optional and available at an extra cost.
9. What happens if you stop paying premium to your term insurance policy?
If you stop paying premium, the policy lapses and the cover ceases with no cost.
10. What is Surrender value?
Surrender Value is the amount the insured receives, if he / she surrender’s the policy before the maturity.
11. Can you surrender your endowment / money back insurance policy before the maturity?
Yes, and depends on the type of policy, its terms and varies from one insurance company to another. Here is an example :
The number of premiums paid / total number of premiums) X sum assured.
Typically, if the policy is surrendered before completion of 2 years, you will not receive the principle or return.
12. Can you surrender your ULIP / Unit Linked Insurance policy before the maturity?
You cannot exit before 5 years of lock in period. After 5 years, one can exit without any extra charges and insured will get back the fund value.
13. How do I track my fund value in a ULIP?
To keep a track of your total fund value, you need to know the Net Asset Value of your funds. This NAV is determined everyday based on the market changes. Insurance companies publish an update for these values regularly.
14. Can I borrow against a ULIP?
No, you can not borrow against a ULIP.
15. What happens if I stop paying premiums before the lock in period in ULIP?
The policy will lapse and the value of the paid up premiums with fund value ( after deducting charges) will move into discontinuation fund. This will earn 3.5% return till 5 years.
16. Within how much time can I revive a lapsed policy?
A lapsed policy can be revived only if it has not crossed the 30 days of grace period. Some
17. How much will it cost to revive a lapsed policy?
The policy holder needs to visit the insurance company. Typically, sum of all premiums along with interest due needs to be paid.A revival penalty may be applicable on the amount to be revived.
18. What is a single premium policy?
In a single premium policy, payment is made at the beginning of the term.
19. What is Deferment Period?
Period between the subscription date of an insurance-cum-pension policy and the time at which the first installment of pension is received is called as deferment period.
20. Should I buy a life insurance policy even if my employer has insured me in a group insurance scheme?
It is always sensible to buy an individual life insurance policy because
a. The amount of insurance covered by your company may not be a very large cover.
b. If your employer decides to cut cost then you may no longer be covered.
c. If you quit the company then you may no longer be insured.
d. Age also plays a role. The premium goes high as you start getting older.
21. What is Annuity?
An annuity is similar to receiving pension. In annuity you will get regular payment for life after investing a lump sum investment.
22. Will I get tax benefit on my life insurance premium paid?
You will get deduction under Section 80C of the Income Tax Act, 1956 of the premuim paid within overall limit of Rs. 1.50 lacs per year. However in case the amount paid towards life insurance premium exceeds 10% of the amount of the sum assured, you will get the deduction only up to 10% of the sum assured.
23. Are the maturity proceeds from life insurance tax free?
The amount received at the time of maturity of the policy is exempt from tax in the hands of the policyholder under Section 10 (10D). If the premium paid for a policy on or after 01/04/2012 exceeds 10% of the actual sum assured, the entire amount received under such policy shall become taxable.
24. What is an Insurance Repository?
An Insurance Repository is a facility to help policy holders buy and keep insurance policies in electronic form.
25. What is death benefit in Whole life policy?
Death benefit in whole life policy is the annuity or pension which is paid to a beneficiary after the passing away of the life insured, either as a lump sum or through regular payments.
26. Can senior citizens avail Whole life insurance policy?
Yes, whole life insurance is a viable option for senior citizens as this policy provides comprehensive cover and does not have any age limit attached under eligibility.
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