Best Life Insurance Policy-An Ultimate Guide

 

Life Insurance

 

What is Life Insurance?

An individual’s life is quite unpredictable, and the best life insurance policy keeps you financially strong to deal with premature death of the sole bread earner. If a family’s only bread-winner dies abruptly, the family loses its only income source and suffers a significant financial crunch. Their savings might not be enough to meet financial needs, such as children’s education, any medical emergencies, and life’s daily needs. This is where comes the need for financial security in such events.

The best life insurance plan ensures financial security and helps the family deal with the financial loss if the bread-winner dies prematurely. It is a legal document signed by both the insurer and the insured person. The life insurance policy in India ensures that the life insurance company will pay a pre-decided sum assured to mentioned beneficiaries in the event where the insured person dies, in trade for the policy premiums paid by the insured person.

Who Should Buy Life Insurance Online in India?

The life insurance policy gives financial help to the family of the policyholder after his death and acts as a backup at such times. Therefore, you must go through a few examples listed below that will help you understand who should buy life insurance online. 

  • Individuals with minor children

Undoubtedly a child is entirely dependent on the parents for the basic needs. However, in a situation where the insured person dies, the financial loss could be heavy on a minor. Therefore, with the best life insurance policy in India, the child gets the policy claims until they become financially independent, and the best life insurance policy in India ensures this.

  • Adults who own property together

Irrespective of the marital status of a person, if two people own a property together and one of them dies, where the other person can not afford the loan payments and taxes of the property is when the life insurance online will come in handy to you. To keep up with the loans, payments, taxes on the property, life insurance policies will help you with the needs at such times.

  • Elderly Parents who are willing to leave money for their adult children who provide them with care

Older people do not always have people to take care of them; however, sometimes, some adult children take time off of work to look after their elderly parents. At such times, the elderly parents can make provision to support adult children even after their death. 

  • Young adults whose parents have Private Student Loan Debt

There are rarely some young adults without dependents who need life insurance online. Yet if a parent is still attached to the child’s debt after the parent’s death, the child might carry life insurance online & that is enough to pay off the debt. This way, life insurance can help young adults whose parents incur a private student loan for them.

  • Young adults who want to opt for Life Insurance Online at Low Premiums

Life insurance policy has lower premium rates when you are younger and healthier. When you are in your 20s and wish to get a life insurance policy even when you do not have dependents, but expectations of it in the future is a smart way to lock down on low rates.

  • Affluent families who expect to owe estate taxes

A life insurance online policy for a well off family who owes estate taxes will have advantages as the funds will cover the taxes and will keep the full value of the estate intact.

  • People who can’t afford funeral & burial expenses

Deaths are uncertain, and so are the expenses that come after. Therefore the best life insurance policy can help you with funds by which you can honour a proper funeral to your loved one who has passed away.

  • Businesses with critical employees

In an organisation, the death of a key employee like the CEO would cause a significant impact on the company and its financial hardships. It might even cause debts that the firm may have. At such times, the purchase of life insurance online for such employees will benefit through insurable interests.

  • Married pensioners

A strategy called pension maximisation can help the married pensioners in a lot of ways. Instead of a pension payout and spousal benefit, the pensioner has the choice to opt for a full pension and utilise some money in life insurance online to benefit their spouse after their death. 

How does the best life insurance policy work?

The best life insurance policy in India comprises three main elements- a premium, death benefit, and cash value.

  1. Premium: A policy premium is the amount of money the insured person pays to avail the benefits of insurance. In the event when the insured person dies, the insurer must pay the predetermined death benefit to the nominees. A portion of the policy premium also goes toward the insurer’s operational costs. Kindly note that the policy premiums are higher on covers with more comprehensive death benefits, people who are more prone to risks, and permanent life insurance policies that comprise the cash-value component.
  2. Death Benefit: The death benefit is the money-assured by the insurer to the beneficiaries named in the insurance when the insured person dies. The insured person might be a parent, and the beneficiaries might be the dependent children.
  3. Cash Value: The cash value component of permanent life insurance policies serves two purposes:
    1. It acts as a savings account that the policyholder can use during the insured person’s life.
    2. The cash accumulates on a tax-deferred basis.

Kindly note that a few life insurance policies might have withdrawal restrictions depending on how you want to use the money.

Different Types of Life Insurance Policies in India

The best life insurance policy in India is mainly of the following two types:

  • Term Insurance

The best term insurance plan, as the name implies, offers coverage for a specific period, usually ranging between 10-30 years. Unlike the whole life insurance, there’s no cash value in it, and that is why, sometimes, it is also also known as pure life insurance. It is created entirely to offer your beneficiaries a sum-assured in case you pass away during the policy’s term.

  • Whole Life Insurance Policy

Whole life insurance comes under permanent life insurance and offers protection for your entire life. It includes a cash-value element like other permanent life insurance policies. A part of your premium money is deposited into a cash-value account, and this amount increases over time based on tax-deferral. Compared to other permanent life insurance policies, whole life insurance policies have the following three determinants:

  • The same level premium for whole life
  • Guaranteed death benefit as long as the policy premiums are paid.
  • The policy includes ensured cash values that rise at a guaranteed rate.

Whole Life vs Best Term Life Insurance

Below-cited is the crucial differences between the best term insurance and whole life insurance:

  • Length of the Policy: Whole life insurance is for your entire life, whereas the best term insurance is only for a limited time duration.
  • Cash value: The best term insurance has no cash value after its expiry, whereas whole life insurance is for the entire life that is accessible to help meet financial targets up to and post-retirement.
  • Policy Premium: For a predetermined death benefit, policy premiums for whole life insurance are higher than the best term life insurance.

Best Life Insurance Policy In India: Other Types

Below-described is some other types of life insurance online:

  • Universal Life Insurance

Universal life insurance is a type of permanent life insurance that offers the cash value and lifetime cover for the entire life. However, there’s a primary difference compared to whole life insurance; that is, the policy premiums have flexibility. With a universal life insurance policy, you can increase or reduce the policy premium as you see yourself fit, within the policy limits. Paying fewer premiums could eventually lead you to bear higher premiums in further years for keeping your policy cover.

  • Final Expense Life Insurance

A final expense life insurance policy intends only to cover post-death expenses life burial & funeral costs. The cover is permanent if you keep paying policy premiums, but no cash value or investment element exists. Older people often buy a final expense insurance policy without dependent kids as it protects the loved ones from paying for these expenses from their pocket.

  • Simplified & Guaranteed Issue Life insurance Policy

Most life insurance is underwritten, that is you need to undergo a medical examination as part of their application process so that the insurer can assess all the risks. Simplified and guaranteed issue life insurance policies do not require a medical examination as these plans are specifically created for older people or those with severe medical issues that may not be eligible for other life insurance policies that require a medical examination.

A few of the best term insurance policies & most final expense insurance are amongst simplified issue life insurance policies and guaranteed issue ones. While you apply for simplified issue insurance, you will be required to fill out a health survey instead of undergoing a medical exam. However, with guaranteed issue insurance, you are not required to undergo a medical exam or take up a medical survey. This insurance typically provides the insured person with the fewer cover than other insurance, and policy premiums are relatively higher as the insurer assumes that there are higher risks of giving them benefits.

  • Group Life Insurance Policy

Group life insurance is a policy you buy as part of a large group like through your office or a member association. Most of the group life insurance policies are term insurance policies. However, a few insurers offer permanent coverage as well (as a voluntary advantage.) A group life insurance policy might not provide the usual comprehensive coverage you desire, but it seems to be an easy & affordable medium to protect your life.

Best Life Insurance Policy: How Much Cover shall I buy?

It would best if you analyse your financial position & requirements before applying for the best life insurance policy you apply for life insurance. For instance, suppose you are the primary bread-winner in your family and have children aged between 2- 4 years, you would require enough coverage until your children become self-dependent. You might also do some research about the cost to hire a professional caretaker and cleaning services, then add some amount for their education as well. Sum up all these costs for the next 16 years, add some more to keep up with inflation rate, and that’s the amount of death benefit you should opt for (provided you can afford it.)

Top 10 Life Insurance Companies in India

The insurance industry in India is vast and diverse. So, have a look at the top 10 life insurance companies in India cited below:

1. LIC (Life Insurance Corporation of India)

LIC is India’s one of the most popular and largest life insurance providers. It is also the only public company out of the 24 life insurers present in the Indian market. This government based entity is one of the oldest insurance providers of India that came into existence in 1956 and is successfully running since then. Currently, LIC has the claim settlement ratio of 97.79%.

2. ICICI Prudential Life Insurance

ICICI Prudential Life Insurance Company came into existence in 2000, and since then has maintained its reputation as India’s one of the most widely recognised insurance providers. It is a joint venture between ICICI Bank & Prudential Corporation Holdings Limited. Currently, ICICI Prudential Life Insurance has a claim settlement ratio of 98.58%.

3. HDFC Standard Life Insurance

HDFC Standard Life Insurance company came into existence in 2000 and is a joint venture between HDFC Ltd. and Standard Life Aberdeen. The company is India’s one of the most reputed life insurance providers with over 400 branches. Presently, HDFC Standard Life Insurance’s claim settlement ratio is 99.04%.

4. Max Life Insurance

Max Life Insurance came into existence in 2000 and is a joint venture between Indian Max India Ltd and Mitsui Sumitomo Insurance Company. It became the largest non-bank private sector insurance company in the country. Its low policy premium makes it India’ one of the best life insurance policies and has also been one of the primary reasons behind its strength & popularity. Currently, the company has more than 1000 branches across the country and has the claim settlement ratio of 98.74%.

5. SBI Life Insurance

SBI Life Insurance came into existence in 2001 and is a joint venture between SBI (India’s largest bank) and BNP Paribas Cardiff (a leading global insurance provider.) Currently, it is India’s well-known insurance provider with the claim settlement ratio of 95.03%. 

6. Bajaj Allianz Life Insurance

Bajaj Allianz Life Insurance Company came into existence in 2001. It is a joint venture between Bajaj Finserv Limited and Allianz SE and has 750+ branches across India. It is popular for its innovative products and timely customer survival with the CSR (Claim Settlement Ratio) of 95.01%.

7. Tata AIA Life Insurance

Tata AIA Life Insurance Company is Asia’s largest insurance group and a joint venture between Tata Sons Pvt Ltd. (the most reliable brand in India) and AIA Group Ltd. (world’s biggest independent insurance group.) Presently, the CSR of Tata AIA Life Insurance Company is 98%.

8. Reliance Nippon Life Insurance

Reliance Nippon Life Insurance Company Came into existence in 2001 and is a joint venture between Reliance Capital and Nippon Life. After acquiring shares, Nippon became the majority stakeholder with 75% shares in the company. Presently, the joint-venture has 700+ branches across India and a CSR of 99.07%.

9. Bharti AXA Life Insurance

Bharti AXA Life Insurance came into existence in 2006 and is a joint venture between Bharti Enterprises and AXA Group. It has branches across 123 cities in India and more than a million customers. Presently, the joint-venture has a claim settlement ratio of 97.28%. 

10. Aditya Birla Sun Life Insurance

Aditya Birla Sun Life Insurance came into existence in 2000 and is a joint move of Aditya Birla Group and Sun Life Financial. Presently, it has over 420 branches across India with a claim settlement ratio of 97.15%.

Required Documents to Buy Life Insurance Online

To buy life insurance online, you have to submit the below-mentioned documents:

  • Duly filled & signed application form
  • Proofs of Age, Identity, Address, Income
  • Your latest photographs ( in colour)

How to Claim the Best Life Insurance Policy?

In case the insured person dies, there occurs a life insurance online claim. For making a claim request, the claimants (nominees) should take the below-mentioned steps:

  • The nominee should fill, sign, and submit the claim form to inform the insurer of the insured person’s death.
  • Also, submit the death certificate and other required claim documents.
  • The insurer then verifies the details & documents
  • If everything’s in place, the insurer approves the claim request.

Best Life Insurance Policy in India: Required Claim Documents

For your death claims requests to be approved, you should submit the below-cited documents along with the duly filled & signed claim form:

  • Certificate of Death
  • Policy Documents
  • ID proof and claimant’s bank account details
  • FIR, post-mortem report, and other docs associated with death by accident

Final Thoughts

Just like ourselves and the world around us, the life insurance policy has evolved. This has made it more reliable as it looks after the unforeseen and upcoming expenses in different ways. As much as life insurance online takes care of the finances to some extent, yet they shall not be entirely looked at from a financial perspective alone. However, there are millions of people who buy insurance for several reasons, and some of which are difficult to explain. Life insurance online is an investment for both the insured persons and their loved ones. With financial assistance, life insurance online can provide a family, describing why it is essential to have one. It not only gives a certain amount of stability but also buys them time to figure out things in the right way.

FAQs

The best term insurance is the kind of life insurance in which the insured person gets the benefits and can exercise them till the time the policy is active. On the other hand, life insurance online gives the assured sum to the nominee in case of the death of the insured person.
The best term life insurance will financially protect your loved ones in case of the insured person’s demise. Irrespective of whether one is the family’s sole earner or not, it would be best if you buy best term life insurance to take care of the needs of your loved ones.
The premium that is paid is tax-exempt as per ITA's Section 80C, up to INR 1.5 lakhs per year. The maturity benefits are also tax-exempted as per section 10D
In the best term insurance policy, riders are available to enhance the coverage of the policy. It can be for accidental death, disability, illness, premium waiver, and benefit of income.
Before you buy the best term life insurance policy, you must research well about the company and its norms. Hence, you should purchase only when you are satisfied with what it provides. You must buy the best term life insurance from a reliable source to avoid falling into the trap of fraud. Look for the reputation, customer reviews, and other such details. You know it's a reliable source when the claim settlement ratio is higher, and there is a low rejection of claims, with a good grievance redressal mechanism and an online reputation.
It is crucial to send a claim request and other required documents to your insurer if the insured person passes away during the policy's term. Once the company verifies and a form is filled to proceed with a claim request, the process shall be initiated.
As per the traditional term insurance plans, if the policyholder dies during the policy term, it pays out the coverage amount. While in plans that have survival benefits, the policyholder will receive a lump sum even if he is alive at the end of policy's term.