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Insurance Notes - Life Insurance

What is a Life Insurance and Why it's neccessary?

  • Life Insurance is a contract providing for payment of a sum of money to the person assured or, following him to the person entitled to receive the same, on the happening of a certain event.  
  • If somebody suffer economic hardship and dies, at that time Dependent Survivors needs life Insurance. Life Insurance is a way to replace the loss of Income that occurs when the earning member of family dies.  If insured person dies while the contract is in force, the insurance company pays a specified sum of money to the person on persons you name as beneficiaries.


TYPES OF LIFE INSURANCE :
• Term Life Insurance
• Permanent Life Insurance

TERM LIFE INSURANCE :  

Under a Term Life contract, the insurance company pays a specific lump sum to the designated beneficiary in case of the death of the insured. These policies are usually for  5, 10, 15, 20 or 30 years.
Term life insurance are the most popular in advance countries but were not so popular in India.   However, after the entry of the private operators and aggressive marketing by few players this kind of policies are becoming popular. The premium on such type of policies is comparatively quite low when compared with other types of life insurance policies, mainly  due to the fact that these policies do not  carry cash value. 


PLUS OF TERM LIFE INSURANCE

MINUSES OF TERM LIFE INSURANCE
·     The premium payable on these policies is low as they do not carry any cash value.
·   One can afford for quite high value insurance policies
·   If one survives the period of the policy, he / she does not get any money at the end of the policy.
· The premium on such policies keeps on increasing with age mainly because the risk of death of older people is more. Over the page of 60, these policies become difficult to afford.

PERMANENT LIFE INSURANCE :  
In a Permanent Life contract, a portion of the money paid as  premiums is invested in a fund that earns interest on a tax-deferred basis.  Thus, over a period of time, this policy will accumulate certain "cash value" which you will be able to get back either during the period of the policy or at the end of the policy.  

Type of Insurance Policies - 

1. ENDOWMENT POLICIES
These policies provide for period payment of premiums and a lump sum amount either in the event of death of the insured or on the date of expiry of the policy, whichever occurs earlier.

2. MONEY BACK POLICIES
These policies provide for periodic payments of partial survival benefits during the term of the policy itself.  A unique feature associated with this type of  policies is that in the event of death of the insured during the policy term, the designated beneficiary will get the full sum assured without deducting any of the survival benefit amounts, which have already been paid as money-back components.  Moreover, the bonus on such policies is also calculated on the full sum assured.

3. ANNUITY / PENSION POLICIES / FUNDS
This policies / funds require the insured to pay the premium as a single lump sum or through installments paid over a certain number of years. The insured  in return will receive back a specific sum periodically from a specified date onwards (the returns can be monthly, half yearly or annually), either for life or for a fixed number of years. 


LIFE INSURERS in India
Life Insurance Corporation of India (LIC)
HDFC Standard Life Insurance Company Ltd.
Max New York Life Insurance Co. Ltd.
Om Kotak Mahindra Life Insurance Co. Ltd.
Birla Sun Life Insurance Company Ltd.
Tata AIG Life Insurance Company Ltd.
SBI Life Insurance Company Limited .
ING Vysya Life Insurance Company Private Limited
Allianz Bajaj Life Insurance Company Ltd.
Metlife India Insurance Company Pvt. Ltd.


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