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The 10 Most Important Facts About Life Insurance

 

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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Introduction: What is life insurance?

 

A life insurance plan is a financial instrument designed to offer financial assistance to an individual’s family in the event of the said person’s untimely death. In return for this financial assistance, the policyholder is required to make periodic payments, known as premiums, to an insurance company. And in the case of the individual’s death during the plan’s tenure, the insurance company would pay an agreed-upon sum of money to the nominees of the deceased.

 

How does life insurance work?

 

Now that you know the answer to the question ‘what is life insurance?’ Let’s now take a look at an example to understand how it works.

Say that an individual who goes by the name of Amit wishes to purchase a life insurance policy. He approaches an insurance company and purchases a life insurance plan. He opts for a death benefit sum assured amount of Rs. 50 lakhs for a tenure of 30 years.

Now, if Amit were to die within the 30-year tenure, the insurance company would be obligated to pay the death benefit sum assured amount of Rs. 50 lakhs to his nominees. Amit’s nominees can then use this payout to further their life goals.

 

10 facts about life insurance plans

 

There are plenty of interesting facts about life insurance plans that you may not be aware of. We’ve picked out 10 of the most important ones for you. Here’s a quick look.

1. There are different types of life insurance plans

With respect to life insurance in India, there are as many as 6 different types currently available for you to choose from. And each of these plans offers varying levels of benefits. Let’s see what the different types of life insurance plans are.

  • Term insurance plans
  • Endowment plans
  • Unit-Linked Insurance Plans (ULIPs)
  • Whole life insurance plans
  • Child insurance plans
  • Pension plans

2. Life insurance premiums increase, or mortality charges change as you age

Your age is one of the primary factors that come into play when determining life insurance premiums. The younger you are, the lower the premiums tend to be. This is simply because younger individuals are at a much lesser risk of contracting illnesses or diseases than older individuals.

Therefore, they are offered lower premiums. However, as you age, the risk factor increases and consequently the premiums that you would have to pay would also increase. Alternatively, in the case of ULIPs, your mortality charges might change as you age while premiums will likely remain the same.

3. You need to assign a nominee

One of the many benefits of life insurance is that it provides beneficiaries financial assistance in the event of the policyholder’s death. However, to make it easier for the beneficiary to be able to claim the death benefit under a life insurance policy, they are made as the nominee in the policy. Also, you can choose to change your nominee at any point during the plan’s tenure too.

4. Some life insurance plans also feature an element of investment

Not all life insurance plans provide just the death benefit. There are a few types that also have an investment component to them in addition to the death benefit. ULIPs and endowment plans, for instance, invest the premiums that you pay towards the plans. And the returns that they generate are then paid out to you upon maturity of the policy.

5. You can enhance the coverage using riders

Riders are essentially add-ons that you can opt for over and above the base life insurance plan. These addons basically serve to enhance the coverage of the base policy by paying a nominal additional premium over and above the base insurance premium. Some of the riders that you can opt for include critical illness riders, accidental death benefit riders, and waiver of premium riders.

The critical illness rider, for instance, provides the policyholder with a payout on the first diagnosis of a specified critical illness. This payout from the rider is in addition to any other benefits that the base policy may provide.

6. Life insurance has many customizable elements

Another benefits of life insurance is that it can be customized according to your needs and requirements. Right from the death benefit sum assured to the policy term, several elements of a life insurance policy can be customized depending upon the policy terms and conditions. As a matter of fact, you can also choose the premium payment term and the premium payment frequency as well.

7. Life insurance covers deaths due to COVID-19

In view of the COVID-19 pandemic that swept across the world, many individuals were unsure whether life insurance would cover deaths due to the disease. Fortunately, all life insurance policies do cover deaths as a result of COVID-19. And this not only applies to new policies being issued, but to older policies as well. So, if you already have a life insurance policy, you can rest assured that it will cover deaths due to COVID-19.

8. The premiums that you pay can be claimed as tax deductions

This is arguably one of the important benefits of life insurance policies. As per section 80C of the Income Tax Act, 1961, the premiums that you pay towards a life insurance policy can be claimed as deductions from your total taxable income. You are allowed to claim up to Rs. 1.5 lakhs in a financial year subject to the provisions stated in the Act, which can reduce your tax liability significantly. In addition to providing your family with a financial safety net, life insurance plans also help you save tax.

9. Life insurance payouts are tax-free

If you thought that was the end of tax benefits of life insurance plans, you’re in for a surprise. According to section 10(10D) of the Income Tax Act, 1961, the death benefit payout from a life insurance policy is also tax-free in the hands of the policyholder’s nominees subject to the provisions stated therein. That’s not all. Any payouts that you receive upon maturity of the policy are tax-free in your hands as well, although this will depend on the product type and its terms and conditions.

10. You can purchase life insurance online

Thanks to the advent of technology and digitization, purchasing life insurance plans is now easier than ever. You don’t have to visit any physical branches to buy life insurance anymore. The entire purchasing process is now online and can be done from the comfort of your own home within a matter of a few minutes.

 

Conclusion

 

And there you have it. These are 10 of the most important facts about life insurance that you have to know. Now that you know the benefits of life insurance, consider investing in one right away and ensure that your family stays financially protected throughout all of life’s uncertainties.

BJAZ-WEB-EC-00457/22

Disclaimers:
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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information. 

The views stated in this article is not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

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Disclaimer

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any call made, SMS or WhatsApp sent in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

 

Please refer to BALIC Privacy Policy

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Disclaimer

%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

X
Disclaimer

Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


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Life Cover + 16% Discount** +Save Tax*!
Under Section 80C & 10(10D) of Income Tax Act, 1961*
Get Life Cover + Save tax up to Rs 46,800*
₹2 Cr Term Plan
@ 21/Day²
Free Health Management Services
upto ₹ 31,000 p.a.^^

Disclaimer:

2Above illustration is for Bajaj Allianz Life eTouch II- A Non-Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N198V01) considering Male aged 23 years | Non-Smoker Preferred | Annual Income =>Rs. 15,00,000 per annum | Indian Resident | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 2,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 7,159. 2nd Year onwards premium is Rs. 7,760. Total Premium is Rs. 2,32,199 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly instalments (Lumpsum Payout Percentage : 40, Income Payout Percentage : 60). Income payout instalment opted for 40 years | Premium shown above is inclusive of Online Discount only, no other discounts have been considered and exclusive of Goods & Service Tax/ any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

**5% Discount applicable for customer's first individual life insurance policy, applicable only on first year’s premium. 5% Discount for salaried customers, applicable only on first year’s premium. 6% Discount on online purchase is available for regular premium payment and limited premium payment frequency, applicable only on first year’s premium.

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy. Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

^^Get Free Health Management Services upto Rs. 31,000 per year

Health Management Services Frequency Cost (₹)
Doctor Insta-Consultations 3 consultations per month = 36 consultations per year Average cost per session = ₹500
Total cost per year = ₹500 * 36 = ₹18,000
Health Coach
(Diet & nutrition consultations)
1 consultation per month =
12 consultations per year
Average cost per session = ₹500
Total cost per year = ₹500 * 12 = ₹6,000
Emotional Wellness
(Psychologists consultations)
1 consultation per month =
12 consultations per year
Average cost per session = ₹500
Total cost per year = ₹500 * 12 = ₹6,000
Network discounts: Throughout the year Assumption – Total expense on these services throughout the year
Medicines (M) = ₹5,000
Lab-test booking (L) = ₹5,000
Total discounts that can be availed:
M - 10% = ₹500
L - 10% = ₹500
Total per year as per assumption ₹31,000

Note: The above mentioned costs are based on estimated average market price for respective services. T&C apply.

Doctor Insta-Consultations and Health Coach Services are unlimited and the above numbers are assumed only for the purpose of calculation of the yearly benefit.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

 

BJAZ-OT-EC-10260/24

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