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Life Insurance 101 - An Introduction To The Basics

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puru singhal
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43 views

Life Insurance 101 - An Introduction To The Basics

Uploaded by

puru singhal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Life Insurance 101 : An Introduction to

the Basics
Lesson 1 - Myths around Life Insurance

Topic 1 - Basics of Life Insurance

- Insurance provides financial protection to an individual's family or the dependent in case


of any mishappening.
- Premium is the amount paid by policyholder periodically to the insurance company for
availing the insurance policy.
- Sum Assured is a fixed amount paid to the nominee of the policyholder if he/she dies.

Topic 2 - Insurance Vs Investing

- Life insurance is different from investment as the former safeguards the future of your
dependents in case of your untimely death, while the latter grows your wealth.
- In insurance little to no risk is involved, while investments carry some amount of market
risk.

Topic 3 - Types of Life Insurance plans

- There are five types of life insurance policies; Term Life Insurance, Whole life insurance,
Endowment Policy, Unit Linked Insurance Plan (ULIP), Money Back Policy, Group Life
Insurance, and Child Insurance plan.
- Term Life Insurance - provides coverage for a certain period of time or a specific "term”.
- Whole Life Insurance Policy - provides cover for the entire life (normally till age 99 or
100).
- Endowment Policy – The policy provides the combined benefit of insurance coverage
and savings.
- Unit Linked Insurance Plan - A portion of your investment goes to life insurance and the
rest into equity funds or debt funds or both.
- Money-back Policy – Guaranteed cash benefit can be received monthly or yearly, as per
your requirements
- Group Life Insurance – Life cover to a defined group all under a single contract or
insurance policy.
- Child Insurance Plans - Invest the money on your behalf and give the maturity amount
you originally aimed for your child after your death

Lesson 2 - Concept of Sum Assured

Topic 1- Calculating Life Insurance Cover

- '20x your yearly income is the most commonly recommended thumb-rule formula for
calculating the cover.
- Sum Insured = Living expenses + Major expenses fund + Major Liabilities - Existing funds
- Factors affecting sum insured;
- Current Annual Income
- Liabilities
- Financial Goals
- Age

Topic 2 - Factors Affecting Premium

- Smoking, drinking, inactive lifestyle/obesity, profession/hobby, driving


record, etc affect your life insurance premium, and basis this your premium
is calculated.
- If you have lesser health-related risks you get a relatively cheaper plan,
owing to the low mortality risk.

Lesson 3 - A-Z Life Insurance Terms


Topic 1 - Important Terminologies I

- Death Benefit is the amount paid to the nominee of the policyholder upon his death.
- Riders are the additional benefits that the policyholder gets in plans other than term
insurance, usually at an extra cost.
- Types of Riders
1. Accidental Death benefit Rider
2. Accidental disability rider
3. Critical illness rider
4. Income rider
5. Waiver of premium rider
- Maturity benefits are the sum assured along with bonuses that the life insurance
provider pays to the policyholder when you survive the policy tenure in case policies
other than term insurance.

Topic 2 - Important Terminologies II

- The grace period is a time the insurance provider gives after the due date to pay the
premium before the policy becomes inactive.
- Surrender Value is the amount the policyholder will get from the life insurance company
if he decides to exit the policy before maturity
- A Lapsed Policy occurs in case of missed premium payment and if cash surrender value is
exhausted.
- Under the Paid-up Value option, if you stop paying premium after a specified period,
your policy will continue but with a lower/reduced sum assured.

Topic 3 - Important Terminologies III

To revive a lapsed life insurance policy;

- Pay the unpaid premiums.


- Pay the interest accrued in the policy lapse period.
- Pay the penalty levied for non-payment of premiums.
- Agree with the new terms and conditions, like - higher premiums for the same policy.
- Factors affecting Revival Period
- duration between the date of policy lapse and the date when the request for
revival is made
- the type of policy.

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