Indian Insurance

Joint life insurance policies are alike to donation policies as they too present prime of life benefits to the policyholders, separately form covering risks like all life insurance policies. But joint life policies are categorized unconnectedly as they cover two lives simultaneously, thus offering a unique advantage in some cases, notably, for a married couple or for partners in a business firm.

Under a joint life policy the sum assured is payable on the first death and again on the death of the survivor during the term of the policy. Vested plus would also be paid besides the sum assured after the death of the survivor. If one or both the lives stay alive to the maturity date, the sum assured as well as the vested bonuses are payable on the maturity date. The premiums payable cease on the first death or on the expiry of the selected term, whichever is earlier.

Group insurance offers life insurance defense under group policies to a variety of groups such as employers-employees, professionals, co-operatives, weaker sections of society, etc. It also gives insurance coverage for people in certain standard occupations at the lowest likely premium cost.

Group insurance plans have low premiums. Such plans are chiefly beneficial to those for whom other normal policies are a costlier proposition. Group insurance plans extend cover to large segments of the inhabitants including those who cannot afford individual insurance.

A number of group insurance schemes have been intended for various groups. These include employer-employee groups, relations of professionals (such as doctors, lawyers, chartered accountants etc.), and members of cooperative banks, welfare funds, credit societies and weaker sections of society.

Life insurance plays a significant role in any individual’s financial planning process. For it is life insurance that helps secure the financial future of the nominees. However, many persons do not know how to go about while allowing for life insurance products. We have identified five points to remember before zeroing in on a life cover product.

1. Identify your needs

Before considering life insurance, it becomes imperative that individuals first identify their needs. An human being should understand whether buying life insurance is needed to begin with. For example, if an individual is single and earning but has no financial dependants, then he may not really need life insurance. This stems from the fact that nobody is going to be ‘financially hurt’ in the absence of the insured (i.e. the individual in question).

On the other hand, we can consider a wedded person who has family members dependent on him. He also happens to be the sole earning member in the family. Such a human being obviously needs life insurance. This stems from the fact that his entire family is dependant on him for financial support and in his company, their lifestyle would be severely impaired. Such individuals should have adequate life cover as early as possible.

2. How much insurance do you need?

After having identified the need to pay money for insurance, the next step is to ascertain the amount of cover needed. The concept of human life value (HLV) can help in deciding how much life cover an individual should opt for. The HLV takes factors like the individual’s annual income and expenses along with the inflation rate into deliberation while calculating the value.

3. Which product should you consider?

After having count the need for insurance, the next step is to finalize a plan that will fulfil the individual’s need. There are two kinds of insurance plans - term plans and savings-based plans. A term plan insures the human being for a high sum at a low cost. A term plan makes for a good fit in all individuals’ portfolios, irrespective of their profile.

Many individuals also look at life insurance as a savings instrument. Here, apart from insuring the individual’s life for a certain amount (i.e. the ’sum assured’ inside insurance parlance) savings-based life cover plans also give returns on maturity. This is unlike term plans, which act as a pure risk cover and do not give any returns on maturity.

Term plan: A possible alternative?

Age (Yrs) Sum Assured (Rs) Tenure (Yrs) Premium (Rs)

Term Plan 30 2,000,000 30 7,000

Savings-based plan 30 2,000,000 30 51,500

As can be seen from the table, it could become expensive for an individual to adequately cover himself for the necessary amount with a savings-based plan due to the higher premiums. Instead, individuals can look at cover themselves with a term plan for the essential amount and invest their savings in various instrument at their disposal like the national savings certificate (NSC), public provident fund (PPF), bank deposit and mutual funds.

4. Select an insurance agent

Having understood how much insurance is needed, an individual then needs to approach a life insurance agent. Individuals wanting to buy cover should if possible opt for full-time life insurance agents. The agent should have a good track record to show for in terms of offering objective advice in the client’s favor plus not his own. This will stand the individual in good stead over the long run since life insurance needs call for evaluation every few years plus the insurance agent will help the individual with the same more than a period of time.

5. Compare policies across companies

Before zeroing in on an insurance plan as of any company, individuals should compare policies across insurance companies. This will help them in appraise which insurance plan is best suited to their needs. One way of doing this is by get in touch with the insurance agent and asking him for a comparative analysis of insurance plans. Another way is by visiting the websites of different companies and scouting for relevant information.

For example, a excellent term plan for a 25 year old can be the one that offers him the necessary cover at the cheapest cost. For a unit linked insurance plan however, different criteria like expenses, fund management and suppleness offered will come into the picture. The contrast will differ across various strictures depending on person needs as well as the type of plan chosen.