“Insurance is a contract between the insurer and the insured wherein against receipt of certain amount, called premium, the insurer agrees to make good any financial loss that may be suffered by the insured, in the case of happening of an event, that is loss of life.

An insurance policy which gives money back at regular intervals.

• If the insured dies during the plan tenure, the full Sum Assured is paid irrespective of the money back received.

Two types:

• Child ULIPs – Its an Insurance cum Investment Plan
• Child Endowment Plans – Works like endowment plans

Features and things to keep in mind:

• Policy term anywhere between 5 – 25 years.
• Partial withdrawal benefit available.
• Only parents and grandparents can buy child plans.
• Maturity benefits under Sec 10 (10D) are tax free.
• Premium qualifies for tax deductions under Sec 80C.
• Child gets all the benefits, including bonus and death benefits upon maturity of the policy or in case of eventuality.
• In case of eventuality of parent, the premium is paid by the insurer till the maturity of the policy and there is no lapse in policy.

Pension plans or retirement plans allow you to allocate a part of your saving which accumulates over a period of time and provides steady income after retirement.

Starts with accumulation phase – period from the time you buy the plan to the time you retire.

• The premiums paid are invested. Premiums paid are eligible for tax benefits under Section 80C/80CCC.
• On retirement, you can withdraw 60% of the accumulated corpus. Entire withdrawal amount is tax free.
• Balance amount is utilized to buy an annuity plan. Annuity plan will be source of regular pension till death.
• Pension that you will receive will depend on the interest rates prevailing at that time and is fully taxable.
• Partial withdrawal of 25% of the fund value can be made after a lock-in period of 5 years .

• Deferred Annuity: Corpus is accumulated over a period and pension starts after the policy term is over.
• Immediate annuity: Lump sum amount is invested and pension starts immediately.
• With cover and without cover annuity plans: “With cover” plans have life cover component. This means that on death of policy holder, lump sum amount is paid out to the family members. “Without cover” pension plan means that there is no life cover. In case of death of policy holder, nominee with get the corpus amount. Currently deferred plans are with cover and immediate plans are without cover
• Annuity certain: Annuity is paid for a specific number of years and the nominee can claim pension after the demise of the policyholder
• Guaranteed Period Annuity: Annuity is paid out for certain periods like 5 years, 10 years, 15 years etc. even if the policy holder does not survive that duration
• Life Annuity: Annuity will be paid out to the annuitant until death. In case of death, the pension will be given to spouse under the “with spouse option”

• Participating plans also called traditional type of insurance plans since bonus in these is similar to the reversionary bonus of standard insurance policies. Bonus is generally in the nature of simple interest.
• Non participating plans declare bonus at the time of investor signing up. Insurance company has no discretion in non participating plans and have to deliver on the amounts promised under the pension plans.
• Over and above the life insurance cover, various riders are available:
  • Personal Accident Insurance
    Covers death or disability due to accidents. Also protects against terrorism related accident losses.
  • Critical Illness Rider
    Will get a lump sum on diagnosis of serious ailments listed in the policy document. Covers heart attack, cancer, paralysis, organ transplant and kidney failure, etc.
  • Waiver of Premium
    Future premium payments are waived off in case of accident, disability or death. This basically protects against incapability of paying premiums due to loss of income.
  • Free Look Period
    • From the day the policy holder receives the policy document, there is a free look period of 15 days as per law.
    • The policy holder can cancel his policy and get a refund within this period.
    • The intention to cancel the policy document should be given in writing. Some companies prescribe a standard form for cancelling the policy in free look period.
    • Policy details, date of receipt of policy document, reason for cancellation and agent details should be mentioned in the application for cancellation.
    •  On receiving cancellation request, insurance company will contact the policy holder to know the reason for cancellation and try to provide solutions.
    • If policyholder still wants to cancel the policy, the insurance company will process the request and arrange for refund.
    • Refund is calculated after deducting:
      a)Pro-rata risk premium for the period on cover
      b)Medical examination charges incurred by insurance company
      c)Stamp-duty charges
  • In case of refund of ULIP’ policy, the refund amount will be as per prevailing NAV of the ULIP on the date of policy cancellation. This is in addition to other deductions applicable on other life insurance policies (i.e. medical examination charges, stamp duty and pro-rata risk premium for the period on cover.

To ensure hassle-free claims:

• Inform the nominee that you have taken the policy
• Explain the benefits of the policy

Provide the details:

• Company number and contact person
• Copy of the policy
• Inform them where the original policy is kept.

Documents required

• Intimation of death is to be given by a proper person in writing
• Original policy bond Death certificate
• Proof of relationship with the deceased person

In case of accidental death

• Postmortem report FIR copy
• Final police report

Following is the list of broad categories of life insurance products:

1. Term Insurance Policies
   • Provides death benefit to the beneficiary in case of death of the policy holder.
   • No interest or premium is returned in case the policy holder survives.
2. Types of Term Plans
   • Standard Term Life Insurance Plans
     • Covers the risk of the insured life.
     • No benefit upon maturity of the cover Term.
   • Return of Premium Plans
     • Returns the premiums paid in case the insured survives.
     • The premium is higher than the term plan.
   • Term Insurance Plan
     • Term insurance plan is for a specific number of years.
     • Only on the death the beneficiary insured amount.
     • Premium payment mode can be single premium or regular.
     • Minimum policy term is 5 years and maximum can be 75 years or whole life depends on the insurer.
     • For single premium policy the term could be between 5 to 15 years.
     • Entry age for a term plan is 18 years and maximum age limit to buy a policy is 65 years.
   • Endowment Plan – Endowment Plan is a life insurance plan designed to pay a lump sum after a specific term (on its ‘maturity’) or on death.
     • Covers the life assured for a specific period of time.
     • If life insured survives, till the end of the period, he will get sum assured + bonus.
     • If Life insured dies within the maturity, insurance company will pay the sum assured to the beneficiary.
     • Guaranteed endowment plans assure the sum assured on death or at maturity but the bonus is not assured.
     • Typical maturities are ten, fifteen or twenty years up to a certain age limit.
     • The guaranteed surrender value is as follows:
       • 30% of the total premiums paid (less any survival benefits already paid) if surrendered during the second year of the policy.
       • 35% of the total premiums paid (less any survival benefits already paid) if surrendered during the third year of the policy.
       • 50% of the total premiums paid (less any survival benefits already paid) if surrendered between the fourth year and seventh year of the policy, both inclusive.
       • 90% of the total premiums paid (less any survival benefits already paid) if surrendered during the last two years of the policy.
     • A policy can be revived up to five years from the discontinuance of the policy.
     • Bonus:
       • Revisionary bonus: extra amount paid on death or maturity.
       • Terminal bonus: discretionary amount over and above the revisionary bonus.
   • Unit-linked Insurance Plan – Unit-linked Insurance Plan is a product offered by Insurance companies that, unlike a pure insurance policy. ULIP gives investors the   benefits of  both insurance and investment   under a single integrated plan.
     • There are different types of ULIPs plans based on the investment objectives of the investor, investment time frame and risk taking ability.
     • ULIPs have different kinds of charges such as – Administration charges, fund management charges, switch charges, mortality charges, premium allocation charges, or withdrawal charges.
     • A policy can be revived up to three years from the discontinuance of the policy.
     • Withdrawal from ULIP is allowed only after completing the mandatory lock-in period of five years and is permitted for specified purposes such as higher education and marriage of children or treatment of self or spouse or for the purpose of buying or constructing a residential house. Besides, a policy holder can withdraw the amount three times during the entire term of the policy.
3. Whole Life Insurance
   • Provides coverage throughout insured’s lifetime provided policy is in force.
   • Dual benefit of life coverage and bonus.
   • Out of premium paid, a portion is used for providing protection and the remaining is invested and used to build a corpus.
   • Survival benefits in the form of periodic payment.
   • Premium is paid for a limited duration but cover is for entire life. Hence premiums are generally high.
   • Contains a cash value component that increases over time.
   • Cash value can be withdrawn or a loan can be taken against it.
   • Tax benefits under Sec 80C of Income Tax Act.