Month: October 2019

Understand how a ULIP calculator works

Ankita Sejpal

Unit Linked Insurance Plans, or ULIPs as they are popularly called, are the hottest selling life insurance plans in the market. The reason is quite simple. ULIPs offer insurance coverage as well as market-linked returns and therefore take care of two goals under the same plan. Individuals, therefore, aim to maximise their wealth through ULIPs. But do you understand how ULIPs work and their return potential?

What are ULIPs?

ULIPs are market-linked insurance plans which invest your premiums in the capital market. There are different types of investment funds with a diversified portfolio. You can choose any one or more of the available funds for investing your premiums. Once invested, your premiums grow as per the market movements and give good returns. Moreover, in case of death during the policy tenure, the plan also promises a death benefit to take care of the financial loss suffered by the family. Given this combination of returns and insurance cover, ULIPs are favoured.

Features of ULIPs

Unit linked plans are quite different from other life insurance plans because of the following salient features:

  1. The returns under ULIPs are not guaranteed. They depend on market movements. Since the returns are not guaranteed, the maturity benefit is also not guaranteed
  2. The policy tenure can range from as low as 5 years to as high as 30 years
  3. After the first five years are over, you can withdraw from your investment partially. This is called partial withdrawal
  4. There are different types of investment funds and each fund has a different risk profile. You can choose any fund as per your convenience
  5. The plan allows you to choose the investment that you want to make, the policy tenure, coverage amount and also the investment funds
  6. You can switch funds during the policy tenure if your risk appetite changes
  7. Additional premiums can also be invested under many ULIPs through the facility of top-ups
  8. In case of death, the death benefit is higher of the sum assured or the fund value
  9. ULIPs are available for fulfilling different types of financial needs like savings need, child planning need, retirement needs, etc.

Why are ULIPs beneficial?

ULIPs are beneficial because of the following reasons –

  1. They are very flexible and allow you to manage your investments as per your needs
  2. You can invest a low and affordable amount of premium to enjoy market-linked returns
  3. Though the maturity benefit is not promised, it is never lower than your investment because ULIPs promise non-negative clawback additions. These additions ensure that your maturity value is higher than the money that you invested
  4. The facility of partial withdrawal allows you to avail funds for emergency requirements
  5. You get tax benefits both on the premiums that you pay and also on the benefits that you receive from the plan

ULIP calculator

The returns under ULIPs are not guaranteed. However, the Insurance Regulatory and Development Authority of India (IRDAI) allows insurance companies to show the expected returns from ULIPs by considering two conservative rates of returns – 6% and 10%. Insurance companies can, therefore, assume these two rates and allow you the possibility of ascertaining your returns through ULIP return calculators. In fact, IRDAI has mandated that there must be an illustration along with the proposal form showing the expected performance of the ULIP at the two assumed rates of interest. So, before investing your premium, you can check the returns from the plan using the ULIP calculator.

To use a ULIP calculator you would have to enter the following details –

  • The amount of premium that you are paying
  • Policy tenure
  • Premium paying term
  • Premium paying frequency
  • The sum assured that you want
  • The investment fund that you have selected

Based on these factors, the ULIP calculator would make a benefit illustration and show you the returns at 6% and 10% rate of interest.

Charges under ULIPs

Unit linked plans have different types of charges which are deducted from the premium that you pay before it is invested. These charges are also expressed in the benefit illustration which gives you a clear picture of the amount that is being invested in the capital market and the return thereon.

You should know and understand these charges to find out how your premiums are being invested and what returns you can expect. The different types of charges which are deducted from your premium include the following –

  1. Premium allocation chargeThis is the main charge which is deducted initially from the invested premium. This charge represents the cost incurred on selling you the policy. The premium allocation charge basically includes the commission paid to the insurance agent to source the policy. This charge is deducted upfront from the premium. The charge is high on the first year premium. From the second year onwards, the charge reduces.
  2. Policy administration chargeThis charge is levied for the administrative costs incurred by the insurance company to manage your policy. This is a monthly charge wherein the fund value is debited by the cancellation of units.
  3. Fund management chargeFund management charge is the fee payable to fund managers who manage the fund’s portfolio to ensure maximum returns. The charge differs across different funds.
  4. Mortality chargeMortality charge is the cost of insurance. Since the plan also covers your death risk, the cost of this death risk is called the mortality cost. Mortality charge depends on your age and the sum assured. Higher the age and/or the sum assured, higher would be the cost.
  5. Policy discontinuation chargeIf you surrender the policy before the completion of five years, a policy discontinuation charge would be applied. This charge would be deducted from your fund value until the first five years are completed.

How ULIP return calculators work?

While the ULIP calculator shows you the expected returns at 6% and 10%, you should understand how the returns are calculated. So, here’s a step-by-step process of calculation of returns under ULIPs:

  1. You pay the premium and choose the sum assured term and investment fund
  2. The premium allocation charge is deducted from the premium and the premium is invested in the chosen fund
  3. The fund performs as per the market
  4. Other charges are deducted from the fund value monthly or yearly as the case may be
  5. The fund, then, grows as per the growth in the capital market and you get the fund value when the policy matures

#5 Best ULIPs to buy

Now you know what are ULIP calculators, how they work and the different charges associated with ULIPs. So now it’s time to check out the best ULIP plans in the market which have the potential to offer the highest returns on your premiums. Here are the top ULIPs that you can buy –

    1. Bajaj Allianz Future Gain PlanOne of the most popular ULIPs offered by Bajaj Allianz, the product has the following features –
        • There are two investment strategies. You can choose to invest as per a readymade strategy or manage your funds yourself
        • The premium allocation charges are very low
        • Riders are available for a more comprehensive coverage
        • You can increase your investments through top-ups

      Plan parameters 

      Entry age1-60 years
      Policy term10 to 30 years
      Premium paying term5 to 30 years
      Annual premiumMinimum – INR 25,000

      Maximum – INR 12 lakhs

      Sum assured7 to 15 times the annual premium
    2. HDFC Life Click 2 Invest ULIP PlanThis is also a popular plan which has the following features –
        • Premium can be paid at once, for a limited period or regularly throughout the policy term
        • There are eight fund options under the plan
        • The plan can be bought online by filling up a simple medical questionnaire

      Plan parameters 

      Entry age30 days to 65 years
      Policy term5 to 20 years
      Premium paying termSingle pay or 5 to 20 years
      Annual premiumMinimum – INR 12,000

      Maximum – no limit

      Sum assured7 or 15 times the annual premium or 1.25 times the single premium
    3. ICICI Pru Signature PlanThis is a new ULIP launched by ICICI Prudential Life. The plan has the following features –
        • No premium allocation charge is deducted from the premium
        • On maturity, the mortality charge and policy administration charges are refunded back
        • Wealth boosters are added to the fund value every five years from the end of the 10th policy year
        • Whole life option is available under the plan wherein coverage is allowed for up to 99 years
        • There are four investment strategies under the plan and you can choose anyone as per your needs.

      Plan parameters 

      Entry age0-60 years
      Policy term10 to 30 years or whole life till 99 years of age
      Premium paying term5 to 30 years
      Annual premiumMinimum – INR 30,000

      Maximum – no limit

      Sum assured7 or 10 times the annual premium
    4. ICICI Pru Life Time Classic PlanThis plan is also a popular ULIP which has the following features –
        • There are nine different funds to invest your premium
        • Free partial withdrawals are allowed under the plan
        • You can choose a readymade investment strategy too if you want to invest your premiums automatically
        • Loyalty additions and wealth boosters are also added to the fund value

      Plan parameters 

      Entry age0 to 75 years
      Policy term10 to 30 years
      Premium paying term5 to 25 years or single pay
      Annual premiumMinimum – INR 30,000

      Maximum – no limit

      Sum assured7 to 30 times the annual premium
    5. TATA AIA Life Insurance Fortune Pro PlanFortune Pro is a flexible ULIP which allows premium payments at once or for a limited period. The features of the plan are as follows –
        • Loyalty additions are added to the fund value besides the market-linked returns
        • There are 11 fund options under the policy
        • There are three optional riders for a wider coverage
        • There are two optional investment strategies to handle your investments better

      Plan parameters 

      Entry age30 days to 59 years
      Policy term15 to 40 years
      Premium paying term5 to 20 years or single pay
      Annual premiumMinimum – INR 50,000

      Maximum – INR 5 lakhs

      Sum assuredUp to 30 times the annual premium

So, choose any of these plans and you would get a ULIP which would give you the best returns along with flexible benefits.

Frequently Asked Questions

      1. How can I buy a unit-linked plan?
        You can buy a unit-linked plan online or offline. Buying offline means buying it through a life insurance agent or through the company’s offices. In these cases, you cannot compare the plan with other ULIPs. Online mode is better as it is quicker and also allows you to compare. You can choose Turtlemint to buy the plan online. Turtlemint is tied-up with leading life insurance companies and you can find the best ULIP on Turtlemint’s platform. You just have to visit https://turtlemint-stage.dreamhosters.com/life-insurance, choose your financial goal, provide your details and you can compare the best ULIPs. You can then select one, pay the premium online and the policy would be issued.
      1. Is mortality charge deducted for the entire duration of the plan?
        No, mortality charges are deducted till the time the fund value equals the sum assured. Once the fund value exceeds the sum assured, the charge is no longer deducted from the premium.
      1. Are 6% and 10% interest rates guaranteed under ULIPs
        No, returns are not guaranteed under ULIPs. 6% and 10% are assumed rates which are used for illustration purposes only.
      1. Is the premium allocation charge deducted every year?
        Premium allocation charge is deducted only in those years when you pay the premium.

 

 

Do you know the 3 Social Security Schemes introduced by the Government of India under Pradhan Mantri Jan Suraksha Scheme?

Rupanjali Mitra Basu

A larger section of the Indian population has been living without pension provision and insurance coverage against illness and an accident. After the huge success of the Pradhan Mantri Jan Dhan Yojana Scheme, the Indian Government has introduced three more social security schemes for citizens to provide protection during old age, in the time of illness and accidents. These financial schemes are known as Jan Suraksha schemes. The schemes are primarily meant for workers in the unorganised sector and to cover underprivileged and rural people. All the three schemes were simultaneously launched in all the major cities across India.

The three social security schemes introduced by the Government of India are as following:

  • Atal Pension Yojana
  • Pradhan Mantri Suraksha Bima Yojana
  • Pradhan Mantri Jeevan Jyoti Bima Yojana

Let’s learn each of these Jan Suraksha schemes in detail

Atal Pension Yojana

The Government of India has introduced Atal Pension Yojana in order to bring in labours of unorganised sectors under the National Pension Scheme (NPS) administered by the Pension Fund Regulatory and Development Authority (PFRDA). The scheme is meant to provide old age income security for the workers of the unorganised sector who has no pension provision. Enrolment to the scheme can be done through LIC and various banks.

Eligibility Conditions for Atal Pension Yojana

  • Indian citizen aged between 18 years to 40 years can apply. The contribution needs to be made for a minimum of 20 years before retirement. Contribution amount may vary depending on the age of the subscriber and the minimum pension amount.
  • Should have a savings account
  • It’s important to provide Aadhaar details and mobile number for KYC requirement. Aadhaar details can be submitted later in case of non-availability at the time of enrolling.

Main features of Atal Pension Yojana

  • Guaranteed monthly pension ranging from INR 1,000 to INR 5,000 per month
  • Government of India will co-contribute INR 1,000 per annum or 50% of your contribution, whichever is lower, provided you are not a taxpayer and are covered under any Statutory Social Security Schemes.
  • Government of India will co-contribute to each eligible subscriber, for the period of five years who joins the scheme from 1st June 2015 to 31st December 2015.
  • Contribution to the scheme will be automatically debited from your savings account. There will be a penalty for delayed contribution. The amount may vary depending on the time
  • Subscribers are allowed to withdraw only after retirement age or 60 years. On exit, the monthly pension would be available. In case of death of the subscriber, pension will be made available to the spouse. In case of death of both, pension corpus will be paid to the nominee.
  • Withdrawal within 60 years of age is allowed only in exceptional cases such as death or terminal illness.

Pradhan Mantri Suraksha Bima Yojana

Pradhan Mantri Suraksha Bima Yojana is an accident insurance scheme introduced by the Government of India. The plan is meant to provide financial protection against unforeseen events like death and impairments at negligible cost.

Eligibility conditions for Pradhan Mantri Suraksha Bima Yojana

  • Indian citizen of the age between 18 years and 70 years can apply for this scheme
  • Should have a savings account
  • It’s important to provide Aadhaar details and mobile number for KYC requirement

Main features of Pradhan Mantri Suraksha Bima Yojana

  • The premium for the scheme is as low as INR 12 per annum, per member of the family. Premium will be automatically debited from the savings account
  • The scheme provides coverage of INR 1 lakh for partial disability and INR 2 lakhs for complete disability or death. The amount will be paid to the designated nominee in case of death
  • One needs to enrol for the scheme on a yearly basis. However, long-term enrolment is also possible with the renewal premium being auto-debited from the savings account of the subscriber every year.

Pradhan Mantri Jeevan Jyoti Bima Yojana

Pradhan Mantri Jeevan Jyoti Bima Yojana of Indian Government is one of the plans offered under Jan Suraksha scheme. Basically, the plan comes with a provision of life cover. The government has offered this term plan to provide financial protection to the family of the subscriber at a nominal premium.

Eligibility of Pradhan Mantri Jeevan Jyoti Bima Yojana

  • Individual (should be Indian resident) between 18 years and 50 years of age can avail this scheme.
  • Maximum maturity age under the scheme is 55 years
  • No medical examination required
  • A savings account is required from which premium will be auto-debited
  • It’s important to provide Aadhaar details and mobile number for KYC requirement

Main features of Pradhan Mantri Jeevan Jyoti Bima Yojana

  • Get INR 2 lakh coverage for your family in an unforeseen event with a minimal premium amount of INR 330 per annum
  • Insurance cover will commence from 45 days of enrolment into the scheme
  • Simple and easy enrolment process without any medical examination

To sum up, the Government’s Jan Suraksha scheme is set to provide basic insurance protection to every household in the country. Jan Suraksha scheme will bring in the excluded sections of Indian society into financial mainstream which will boost the overall well-being of people in the country as well as for the economy.

Do you know the exact difference between the sum assured and the sum insured?

Ankita Sejpal

Do you know the exact difference between the sum assured and the sum insured?

When it comes to the concept of insurance, there are some technicalities which you should understand. These technicalities dictate the terms and conditions of the policy. Until and unless you understand the terms of the policy, understanding the policy benefits might prove to be a challenge. Take for instance the concepts of sum assured and sum insured. Both these terms determine the coverage level of an insurance policy and so you might believe them to be interchangeable. But are they interchangeable?
No, they are not. Sum insured and sum assured are two different concepts which are used in different types of insurance policies. Let’s understand their difference –

What is the sum assured?

Sum assured represents the coverage of a life insurance policy. This is the benefit which is paid in case of death or maturity of the plan.

What is the sum insured?

Sum insured, on the other hand, is the level of coverage under general insurance policies. This amount shows the maximum liability undertaken by the insurance company to compensate you in case of a covered eventuality.

Top #3 points of difference between sum assured and sum insured

The difference between the concepts of sum assured and sum insured can be analysed in the following table –

Points of differenceSum assuredSum insured
ApplicationThe term is used in life insurance policiesThe term is used in general insurance policies
NatureSum assured represents a predetermined benefit which is fixed. In case of death or maturity, a life insurance policy pays the promised sum assured irrespective of the loss sufferedSum insured implies that the principle of indemnity would apply in case of a claim. The principle of indemnity pays the actual loss which the policyholder suffers. This loss might be lower than the sum insured of the plan
RelevanceThe concept of sum assured becomes relevant because the economic value of human life cannot be measured. Thus, in the case of death, the cost of loss of life cannot be ascertained. The policy, therefore, pays the coverage amount which the policyholder chose when buying the policyGeneral insurance policies are taken on assets or to cover the financial loss suffered in certain events. The value of the asset or the extent of loss suffered can be easily ascertained. That is why general insurance policies follow the principle of indemnity and use the concept of the sum insured.

Illustration:

In a life insurance policy, if the cover is bought for INR 10 lakhs and the insured dies during the policy tenure, the death benefit would be INR 10 lakhs which is the sum assured of the policy.
In case of general insurance policies, say health insurance, let’s assume the coverage level to be INR 5 lakhs. When the insured is hospitalised, the medical bills amount to INR 3 lakhs. In this case, though the sum insured is INR 5 lakhs, the claim payable would only be limited to INR 3 lakhs which is the actual loss suffered. However, if the hospital bills amount to INR 6 lakhs, the claim would be INR 5 lakhs which is the maximum liability insured by the insurance company.

So, the concepts of the sum assured and the sum insured is different. Understand them and their relative differences so that you know what your insurance policy would pay in a claim.

Life Insurance: Meaning, Features, Types & Benefits

Rupanjali Mitra Basu

There is a big ‘if’ in the word ‘Life’ itself. The word ‘if’ represents all the challenges that life throws at you. Life is uncertain and the best way to deal with these uncertainties is to be prepared against them. One such uncertainty is death. While death is inevitable, premature death is uncertain and if it happens, it creates emotional as well as financial loss. While emotional loss cannot be compensated against, financial loss can be. This is where life insurance comes into the picture. Life insurance policies are designed to cover the risk of premature death. If the insured dies during the term of the policy, life insurance plans pay a death benefit. However, life insurance is a broad concept which cannot be summed up in the above two lines. So, let’s understand life insurance meaning in details.

What is life insurance?

Life insurance is a policy which covers the risk of premature death. If, during the term of the policy, the life insured dies, the policy promises to pay a death benefit. Life insurance policies are legal contracts where, against the coverage offered by the insurance company, you are supposed to pay a premium for availing the coverage. Moreover, besides premature death, many life insurance plans also cover survival to the end of the policy tenure wherein a maturity benefit is paid.

Top 5 features of life insurance plans

Some of the salient features of life insurance policies are as follows –

  1. The individual whose life is covered under the policy is called the life insured or life assured
  2. The individual who pays the premium for the policy is called the policyholder
  3. The policyholder and the life insured can be same or different. When you buy a life insurance policy on your life, you are the policyholder and life insured. However, when you buy a policy on the life of your spouse or dependent child, you would be the policyholder but the life insured would be the spouse of the dependent child
  4. Every life insurance policy has a specified duration and coverage level which you can choose
  5. There are different types of life insurance plans and each plan has a different benefit structure

Importance of life insurance plans:

Here are the reasons why life insurance plans are important –

  • Life insurance policies provide financial security. They promise to give your family financial assistance in case of your premature death
  • There are different types of life insurance plans and each plan helps you in fulfilling your life’s financial goals
  • By investing in life insurance policies you can buy peace of mind for yourself as far are financial stability is concerned
  • Life insurance policies also give you tax benefits and help in lowering your tax liabilityGiven these benefits of life insurance plans, you should invest in a suitable policy.

Different types of life insurance policies

As stated earlier, life insurance plans come in different variants. Let’s understand these variants and their respective features –

  1. Term insuranceTerm insurance is the most basic type of life insurance policy. The policy promises death benefit during the term of the plan. On maturity, usually, nothing is paid. Term plans are the cheapest form of life insurance which gives you unmatched financial protection.Salient features of term insurance
    • Term plans allow high coverage levels at a low cost
    • Coverage can be taken for very long durations going up to 30 or 35 years or till 85 years of age. Different plans have different options available
    • There are different types of term plans which are as follows
      1. Increasing term plans where the sum assured increases every year
      2. Decreasing term plans where the sum assured reduces every year
      3. Level term plans where the sum assured does not change
      4. TROP or Term Plan with Return of premium option where the premiums paid are returned if the plan matures
  • Whole life insuranceWhole life plans, as the name suggests, run for your whole life and allow coverage till you reach 99 or 100 years. These plans are like term insurance plans but with indefinite coverage duration.Salient features of whole life insurance plans
    • Coverage is allowed till 99 or 100 years of age
    • Different types of whole life plans are available in the market. You can buy endowment oriented plans, money back whole life plans, pure protection plans or even unit linked plans
    • Premiums under whole life plans are payable for a limited period
    • Under endowment oriented, money back or unit linked plans, there is also a maturity benefit if you survive till 99 or 100 years of age
  • Endowment assuranceEndowment plans are traditional savings-oriented life insurance plans. These plans provide coverage against premature death. Moreover, on maturity, a guaranteed maturity benefit is also promised. Endowment plans, therefore, promise insurance as well as savings.Salient features of endowment assurance plans
    • Endowment assurance plans are a combination of insurance as well as investment options
    • Coverage duration can range from 10 years to up to 30 years
    • The plan usually offers guaranteed benefits on death or maturity at 99 years of age
    • The plan can be a participating or a non-participating plan.
      1. Participating plans earn bonus
      2. Non-participating plans do not earn bonus
    • Guaranteed additions or loyalty additions are also promised under many endowment assurance plans
  • Money back planMoney back plans are also called anticipated endowment plans because they are like endowment plans but with anticipated benefits. Under these plans, the sum assured is paid in instalments at specified durations over the policy tenure. This allows liquidity while at the same time providing life insurance coverage.Salient features of money back plans
    • The money back benefits are called survival benefits
    • Money back plans are offered as participating plans where bonuses are added
    • In case of death of the insured, the entire amount of sum assured is paid irrespective of the survival benefits already paid earlier
    • The tenure of a money-back plan often ranges from 12 or 15 years till 20 or 25 years.
  • Unit linked insurance plansUnit linked insurance plans are unique life insurance plans which provide the double benefit of insurance as well as investment returns. Premiums paid for these plans are invested in market linked funds. This fund then grows as per the performance of the market. If the insured dies during the policy tenure, a death benefit is paid. On maturity, the fund value is paid which is equal to the premiums invested along with the returns that they earned over the term of the policy.Salient features of unit linked plans
    • There are different types of investment funds suitable for different risk appetites
    • You can choose the premium that you want to pay, the investment fund and the duration of the plan
    • Partial withdrawals are allowed after the completion of 5 policy years wherein you can withdraw from the fund
    • Switching is allowed for changing the selected investment fund
    • Many unit linked plans also allow additional premiums through top-ups
    • Higher of the sum assured or the fund value is paid on death. On maturity, however, the fund value is paid
  • Child planChild insurance plans are life insurance plans which are created to secure your child’s future. Under these plans, there is an inbuilt premium waiver rider. This rider waives the premiums in case of death of the parent who is also the policyholder. Though the premiums are waived, the policy continues and pays a benefit after the end of the term when the child needs it for higher education or marriage. Child insurance plans, therefore, ensure a corpus for the child’s future whether the parent is alive or not.Salient features of child insurance plans
    • Child plans can be traditional endowment or money back plans or unit linked plans
    • Only parents of minor children can buy the policy
    • The life insured can be parents or the minor child. The policyholder, however, would always be the parent
    • When the child attains 18 years, he/she becomes the policyholder. The policy, then, vests in the child’s name
    • If the parent is the life insured, in case of death during the term, a death benefit is immediately paid. The plan, however, continues to run and the insurance company pays the premiums. Thereafter, on maturity, a maturity benefit is paid again
  • Health planLife insurance companies also offer health insurance policies. These policies either cover specific illnesses or a list of critical illnesses. If the insured suffers from the illnesses covered by the plan, a lump sum benefit is paid as per the policy’s benefit structure.Salient features of health plans
    • The plans are offered for a period of 5 years to 30 years
    • The plans pay a lump sum benefit irrespective of the medical costs incurred
    • Heart related illnesses, cancer and other critical illnesses are some of the commonly covered illnesses under health plans
  • AnnuityAnnuity plans or pension plans are retirement oriented life insurance plans. Under these plans you can either create a retirement corpus or avail lifelong incomes from an already accumulated corpus. Pension plans help you plan for your financial needs post retirement.Salient features of pension plans
    • There are two types of pension plans – deferred annuity plans and immediate annuity plans
    • Under deferred annuity plans you can choose a policy tenure and pay premiums to build up a retirement corpus
    • Under immediate annuity plans annuity payments commence immediately after you buy the plan
    • Under deferred annuity plans, 1/3rd of the accumulated corpus can be withdrawn in cash through commutation. The remaining would then be used to avail annuities
  • Life insurance ridersBesides the above-mentioned types of life insurance plans, there are riders too which are additional coverage benefits. Riders are available with almost all types of life insurance plans (except health and immediate annuity plans). You can choose any rider as per your coverage needs by paying an additional premium.Salient features of life insurance riders
    • Riders have their own sum assured which can be equal to or lower than the sum assured of the base policy
    • You can choose multiple riders
    • Each rider comes with an additional premium
    • Riders do not have any maturity benefit. They cover a specific contingency and pay a benefit only if that contingency occurs

Types of life insurance riders

Life insurance riders can be offered in the following types –

Type of riderMeaning 
Accidental death and disablement benefit riderThis rider pays an additional sum assured if the insured dies or becomes permanently disabled due to an accident
Critical illness riderThis rider covers a list of critical illnesses. If the insured suffers from any of the covered illnesses during the term of the policy, the rider pays a lump sum benefit
Premium waiver riderThis rider waives the premiums payable under the policy if the insured becomes disabled
Hospital cash riderThis rider pays a daily cash allowance if the insured is hospitalised for 24 hours or more
Term riderThis rider pays an additional sum assured if the insured dies during the policy tenure

What is life insurance claim?

Now that you have understood life insurance meaning and the different types of life insurance policies, let’s understand claims. It is important to understand what is life insurance claim so that you can understand the benefits that you receive from different plans. Life insurance claims are of different types which can be understood below –

life insurance claim

Here’s a brief description of each type of claim –

Type of claimMeaning Who gets the claim?
Maturity claimThis claim is paid when the policy completes the chosen term and the life insured is alive at the end of the term. Maturity claims are initiated by the life insurance company itself as the policy approaches maturityThe claim is paid to the policyholder
Death claimIf the life insured dies during the term of the plan, the claim that is paid is called a death claim. Death claims would be paid when the insurance company is intimated about the death of the insuredDeath claims are paid to the nominee appointed by the life insured
Survival benefit claimsThese claims are paid under money back policies. Under these claims a part of the sum assured is paid as money back benefit if the life insured is alive at the time of payment of the money back benefitThe claim is paid to the policyholder
Rider claimsIf the contingency which was covered by a rider happens, a rider claim is paidThe claim can be paid to the policyholder or the nominee depending upon the type of rider
Health claimsIf the insured suffers from an illness which was covered under the health insurance plan, a health claim is paidThe claim is paid to the policyholder

Life insurance companies in India and their claim settlement ratios

In India, there are 24 life insurance companies operating in the market. Apart from LIC, which is owned by the Government of India, all other insurers are privately owned companies.

Life insurance companies are often judged by their claim settlement ratios. The ratio denotes the number of claims paid by the life insurance company against the total claims made upon it in a financial year. It is calculated as a percentage and published by the Insurance Regulatory and Development Authority of India (IRDAI) every year. The higher the ratio, the better the company is perceived to be since it can be trusted to settle its claims. You can, therefore, choose a life insurance company based on its claim settlement ratio among other things.

Here is a complete list of life insurance companies currently operating in India along with their published Claim Settlement Ratios for the financial year 2017-18 –

Name of the life insurerClaim Settlement Ratio
Life Insurance Corporation of India98.04%
HDFC Life Insurance Company Limited97.80%
Max Life Insurance Company Limited98.26%
ICICI Prudential Life Insurance Company Limited97.88%
Kotak Mahindra Life Insurance Company Limited93.72%
Aditya Birla SunLife Insurance Company Limited96.38%
TATA AIA Life Insurance Company Limited98%
SBI Life Insurance Company Limited96.76%
Exide Life Insurance Company Limited96.81%
Bajaj Allianz Life Insurance Company Limited92.04%
PNB MetLife India Insurance Company Limited91.12%
Reliance Nippon Life Insurance Company Limited95.17%
Aviva Life Insurance Company Limited94.45%
Sahara India Life Insurance Company Limited82.74%
Shriram Life Insurance Company Limited80.23%
Bharti AXA Life Insurance Company Limited96.85%
Future Generali India Life Insurance Company Limited93.11%
IDBI Federal Life Insurance Company Limited91.99%
Canara HSBC OBC Life Insurance Company Limited95.22%
Aegon Life Insurance Company Limited95.67%
DHFL Pramerica Life Insurance Company Limited96.62%
Star Union Dai-ichi Life Insurance Company Limited92.26%
IndiaFirst Life Insurance Company Limited89.83%
Edelweiss Tokio Life Insurance Company Limited95.25%

Tax implication of life insurance policies

When talking about the benefits of life insurance policies, their tax efficiency was highlighted. Let’s understand how life insurance plans can help you save tax –

  • Tax benefits on premiums paidThe premiums that you pay for your life insurance plans (except annuity plans and health insurance plans) are allowed as a deduction from your taxable income under Section 80C. As per the provisions of this Section, you can claim a deduction of up to INR 1.5 lakhs by paying premiums of your life insurance policies.The premiums paid for annuity plans also qualify as a deduction but under a different Section. Pension plan premiums are allowed as a deduction under Section 80CCC of the Income Tax Act. The limit under this Section is also up to INR 1.5 lakhs but it also includes the deductions under Section 80C. Thus, you can claim a maximum deduction of up to INR 1.5 lakhs aggregately from life insurance premiums as well as pension plan premiums under Section 80C and Section 80CCC respectively.

    For health insurance policies, the deduction is allowed under Section 80D. You can claim a maximum deduction of up to INR 25,000 by investing in health insurance plans. If you are a senior citizen, you can enjoy a higher deduction as the limit increases to INR 50,000. Moreover, if you buy a health insurance plan for your dependent parents, you can claim an additional deduction. This deduction would be up to INR 25,000 if your parents are below 60 years of age and INR 50,000 if they are senior citizens. Thus, Section 80D offers you a maximum deduction of up to INR 1 lakh.

  • Tax benefits on claimsThe claims received under life insurance policies are completely tax-free under Section 10(10D) of the Income Tax Act. Whatever be the type of claim that you receive, the entire amount would be allowed as a tax-free income without a maximum limit.
  • Tax benefit on commuted pensionIn case of deferred annuity plans, 1/3rd of the corpus which you withdraw as cash is called the commuted pension. This commuted pension is completely tax-free in your hands under Section 10(10A) of the Income Tax Act.
  • Tax implication of annuitiesThe annuity payments that you receive from life insurance pension plans are considered to be an income in your hands. This income is taxable and would be subject to tax at your prevailing income tax slab rates.

How to buy life insurance plans?

Having understood life insurance meaning and its importance, it is imperative that you buy a life insurance policy for your financial needs. To buy the policy, you have two options which are as follows –

  1. Buy offline
  2. Buy onlineBuying offline means buying the policy from a life insurance agent or by visiting the insurance company’s branches. It is time consuming and involves unnecessary hassles. The easier way to buy life insurance plans is online. The online platform allows you to buy life insurance policies easily and quickly. Turtlemint is one such online platform wherein you can buy the best life insurance policy for your requirements.

The benefits of buying online from Turtlemint are as follows –

  • You get to compare the insurance plans offered by leading life insurance companies. You can, therefore, choose the best policy in respect of coverage and premium rates
  • Turtlemint gives you personalised assistance in case you have any queries about any life insurance policy before you buy. You can, therefore, clear your doubts and know exactly what the policy promises
  • Even in the case of claims you can contact Turtlemint’s team and they help you in getting your claims settled quickly and easily

Given these benefits, buying from Turtlemint is a wise choice.

To buy a life insurance policy, you need to fill up a proposal form and submit your relevant documents. The documents needed to buy a life insurance policy include the following –

  1. Photographs of the life insured and the policyholder (if different from one another)
  2. Identity proof
  3. Address proof
  4. Age proof
  5. Income related documents if you are paying a high premium and opting for a high sum assured
  6. Medical reports, if required
  7. Any other document as required by the insurance company

When these documents are submitted, the insurance company verifies the information you mentioned in the proposal form. If everything is found to be correct, the life insurance policy is issued.

A life insurance policy proves to be a financial weapon in the face of contingencies. While you cannot avoid the challenges life throws your way, you can definitely insure the risks that you face. Life insurance plans promise coverage of your life risk and help you create a safe financial net for your loved ones. So, invest in a life insurance policy and secure your family’s happiness.

Know everything about Loan against LIC policy

Sidharth Hampanavar

The Life Insurance Corporation of India (LIC) is one of the leading life insurance companies in the insurance market. The company was formed in the year 1956, making it the oldest life insurance company in India. Being the oldest company, LIC has a huge customer base and a large market share.

LIC India offers comprehensive insurance plans for its customers. It has a range of policies for the varying needs of its customer base. You can find detailed reviews and browse some of LIC’s best insurance plans in India here.

LIC offers a range of life insurance plans for its customers. You can find term plans, endowment plans, money back plans, child plans, unit-linked plans, pension plans and even health insurance plans in LIC’s kitty. These plans provide unmatched coverage benefits at affordable premium rates. Moreover, many life insurance plans offered by LIC also offers policy loans. Do you know about LIC loan on policies?

What is LIC loan on the policy?

Under traditional savings oriented life insurance plans you have the option of availing a loan against LIC policy. This LIC loan is available against the surrender value of the plan. The loan is like a personal loan which you can use for any personal or commercial financial needs that you have.

Features of LIC loan:

Availing a loan against LIC policy has various important aspects which you should know. These aspects include the following – 

  • LIC loan is available after the plan completes a specified tenure. This tenure can be one to three years depending on the mode of premium payment. Moreover, the full premiums should be paid during this tenure
  • The loan is calculated on the surrender value of the policy. The maximum loan which you can avail depends on the terms and conditions prescribed by LIC from time to time
  • Interest would be payable on the amount of loan that you avail. The LIC policy loan interest rate is not fixed. LIC interest rate on the policy is fixed by LIC from time to time
  • You have to repay the loan within the duration of the policy. If the loan is not repaid and the policy matures, the outstanding loan amount would be deducted from the maturity benefit. Similarly, in the case of death, the death benefit would be paid after deducting the loan amount

Which plans offer LIC loan?

As stated earlier, traditional savings plans offer LIC loan. These plans can be endowment plan, money back plans or child plans. Here is a list of plans which offer a loan on LIC policy and the period after which you can avail the LIC loan –

LIC loans under endowment assurance plans

Endowment plans offer you the option of raising a secured financial corpus. If you want to browse more endowment plans, you can click here.

Name of the plan

When is LIC loan available 

LIC’s Jeevan Pragati Plan 

After three full years’ premiums have been paid.

LIC’s Jeevan Labh

After three full years’ premiums have been paid.

LIC’s Single Premium Endowment Plan 

After the end of the first policy year

LIC’s New Endowment Plan 

After three full years’ premiums have been paid.

LIC’s New Jeevan Anand 

After three full years’ premiums have been paid.

LIC’s Jeevan Rakshak

After three full years’ premiums have been paid.

LIC’s Limited Premium Endowment Plan 

After two full years’ premiums have been paid.

LIC’s Jeevan Lakshya

After three full years’ premiums have been paid.

LIC’s Aadhar Shila 

After three full years’ premiums have been paid.

LIC’s Aadhar Stambh

After three full years’ premiums have been paid.

LIC loans under whole life plans

Name of the plan

When is LIC loan available

LIC’s Jeevan Umang

After three full years’ premiums have been paid.

LIC loans under money back plans

Name of the plan

When is LIC loan available 

LIC’s Bima Shree 

After two full years’ premiums have been paid.

LIC’s Jeevan Shiromani

After the end of the first policy year

LIC’s New Money Back Plan – 20 years

After three full years’ premiums have been paid.

LIC’s New Money Back Plan – 25 years

After three full years’ premiums have been paid.

LIC’s New Bima Bachat 

After the end of the first policy year

LIC’s New Children’s Money Back Plan

After three full years’ premiums have been paid.

LIC’s Jeevan Tarun 

If Premium Paying Term is less than 10 years – After two full years’ premiums have been paid.

If Premium Paying Term is 10 years or more – After three full years’ premiums have been paid

Money back policy is a traditional policy gives you life protection along with savings, this plan provides you periodic payments during the policy tenure. Click the link below to know more.

Pros and cons of loan on LIC policy

Though LIC policies offer loans, there are both advantages and disadvantages of availing such loans. Let’s understand what these advantages and disadvantages are –

Advantages of LIC loan

  • The loan process is very easy and convenient. You can avail LIC loan online through some clicks of your mouse
  • The loan is a multipurpose loan which can be used for any financial need that you have
  • Since LIC policies can be taken for longer durations, you get a longer repayment period to pay off the loan affordably 
  • The LIC loan interest rate is low compared to other personal loans available in the market and ranges from 9-11%
  • There is no processing fee involved when you apply for LIC loans
  • You can pay the loan as per your convenience. There is no EMI repayment option. The loan can be paid in instalments at any time during the policy period

Disadvantages of LIC Loan

  • If you fail to repay your loan, the policy would be terminated by the insurance company. As such, you would lose the coverage benefits under the plan
  • Since the loan is offered against the surrender value of your policy, the loan amount would be limited. It might not prove sufficient to cover your financial requirements
  • If you have availed a loan on LIC policy, the same policy cannot be used as collateral for availing other loans
  • The maturity and death benefit is greatly reduced if you do not repay the loan and the outstanding amount is deducted from them. Such low values hamper wealth creation

You should, therefore, understand the pros and cons of LIC loans before availing them.

Who can apply for LIC loan?

You can apply for LIC loans if you meet the following eligibility criteria –

  • You are aged 18 years and above
  • You are the policyholder and own a LIC policy
  • The policy that you own allows loan facilities
  • The policy has acquired a surrender value against which you can get the loan

Documents required for LIC loans

You would have to submit the following documents to avail LIC loans –

  1. Your policy bond in original
  2. An application for availing a loan on LIC policy
  3. An assignment deed through which you assign the loan in the name of LIC
  4. Your identity proof
  5. Your address proof
  6. Your income proof

4 Important things to remember about LIC loans

Here are some important things regarding a loan on LIC policy that you should keep in mind –

  1. The maximum amount of loan which is available is limited to 90% of the policy’s surrender value
  2. If the policy is in a paid-up state where premiums are not being paid any more, the maximum loan that you can avail would be limited to up to 85% of the surrender value
  3. LIC loan interest would have to be paid half-yearly
  4. The minimum loan tenure is six months. Even if you repay the loan within six months, interest for six months would be charged by LIC

How to get a loan against LIC policy?

You can apply for LIC loan in the following two ways –

  • Offline Process:
    By approaching the nearest branch of LIC and filling out a loan application form. You would then have to submit the form with other loan-related documents and request for LIC loan
  • Online Process:
    You can apply for LIC loan online if you are a registered user and have registered for premium services. The process for an online loan application is as follows –
  • Visit the home page of LIC’s website and choose ‘Online Loan’ 
  • You would be taken to a new page wherein you can request online LIC loan by clicking ‘Through customer portal’
  • Provide your user ID, password and date of birth in DD/MM/YYYY format to proceed
  • Once you log into your LIC account, choose the policy on which you want LIC loan
  • Make a loan request and the request would be processed

    • Loan against LIC policy offers the policyholders an assurance of help during emergencies. This provides further benefits apart from traditional policy coverage. Get these advantages by purchasing life insurance plans for yourself and your loved ones from LIC below.

    If you have not registered for premium online services, here are the steps how you can do so – 

  • Log into your online LIC account using your user ID and password 
  • Fill up the registration form for premium services. Your date of birth, mobile number and email ID would be auto-filled. You would have to enter your PAN Card number or passport details
  • Then you can see your LIC policies
  • Choose the policies on which you want to activate premium services
  • After the form is filled, save the form and print out a copy
  • Sign the form
  • Scan the form along with any of your KYC documents in the format of .bmg, .jpeg, .tiff, .bmp, .gif, .png image
  • Upload the image of the registration form and the scanned copy of your KYC document and PAN card or passport
  • Click ‘Submit’
  • You would then get an acknowledgement email as well as an SMS stating that your request has been accepted
  • The company would verify the form and your uploaded documents and send an acknowledgement stating the activation of premium services.

Once you are registered for premium services you can apply for LIC loans. Moreover, besides applying for LIC loan, you can also pay the loan online and check LIC loan status online on your LIC account.

Top #6 Benefits of LIC loan vis-à-vis other loans: 

Loan against LIC policy has various benefits over other types of loans. These benefits include the following:

  1. No processing fee
  2. No hidden charges
  3. Easy application process
  4. Longer repayment periods
  5. Low-interest rates
  6. No requirement of your credit score

LIC loan against the policy is a good way to avail funds from your life insurance plans if you face a financial crunch. You would get the loan easily and the repayment process is also flexible. With low-interest rates, LIC loans are a good option which does not tax your finances.

Taking these factors into consideration, LIC policies can be an attractive insurance option. You can compare them with ease by clicking on this link.

LIC insurance plans offer this extra advantage of availing a loan against LIC policy for the insurance holders. Therefore, getting a life insurance plan from LIC can offer a secure future along with the convenience of borrowing a loan.
Turtlemint can help you choose the best LIC policy according to your needs and eligibility. Check the best policy for your profile and buy it today to protect yourself and your family.

Frequently Asked Questions:

  1. What is the maximum loan which can be taken?

    You can avail a maximum loan of up to 90% of the policy’s surrender value. This limit reduces to 85% of your policy is paid-up.

  2. What would happen if the loan is not repaid?

    If the loan is not repaid, the amount is deducted from the maturity or death benefit when they are paid. However, if the loan is not repaid and the outstanding loan plus the interest amount exceed the surrender value, LIC would foreclose the policy. 

  3. What happens when the policy is foreclosed?

    If your loan liability exceeds the surrender value, LIC would send a notice to you asking for repayment of a part of the loan. If you pay the loan partially, the outstanding liability reduces and the policy continues. However, if you are unable to make any payment towards the loan, LIC would foreclose the coverage. Foreclosure means termination of the plan. The coverage benefit would stop and you would get the remaining surrender value after the outstanding loan is deducted from it.

  4. Can loan interest rates change?

    Yes, the LIC interest rate on policy might change any time as per the discretion of the company.

The Difference Between Term Insurance and Life Insurance

Ankita Sejpal

Life insurance is synonymous with financial protection. Life insurance plans compensate against the financial loss suffered in case of premature death. Moreover, the plans are designed in such a manner that they help in fulfilling your life goals effectively. For instance, there is a child insurance plan which helps you create a secured financial corpus for your child. Similarly, there are pension plans which create an earmarked retirement fund and promise lifelong incomes. Thus, life insurance plans find a place in every aspect of your life and give you financial security.

Life insurance comes in many variants which constitute the different types of life insurance plans. Among these variants, term insurance is often compared with other types of life insurance plans. But is the comparison justified? Is term insurance similar to the other types of life insurance plans?

No, it isn’t. Term plans differ from other types of life insurance plans in various aspects. Let’s understand this difference between term insurance and life insurance in details –

What is the term plan?

A term insurance plan is a type of life insurance plan which covers the risk of premature death. In case of death of the insured during the term of the policy, the policy promises to pay a death benefit. Term insurance plans promise high coverage at low premiums allowing you to avail a high sum assured which would be able to meet your family’s financial requirements in your absence.

What are other life insurance plans?

Term insurance is a type of life insurance plan among others. Besides term insurance, life insurance plans come in other variants too. These variants include the following –

  • Whole life insurance plans
  • Endowment assurance plans
  • Money-back plans
  • Child plans
  • Unit linked insurance plans
  • Pension plans

Term insurance v/s life insurance

Now that you have understood the basic meaning of both, let’s understand the difference between term insurance and life insurance plans. The differences between the two can be outlined in the following parameters –

  • Coverage Term insurance plans promise coverage only against premature death. Under most term plans, the benefit is paid only if the insured dies during the tenure of the plan.

    Other types of life insurance plans, however, also have a maturity benefit. While these plans cover the risk of premature death, they also pay a benefit if the insured survives until the end of the policy tenure. Thus, in terms of coverage, term plans and other insurance plans are quite different.

  • VariantsTerm insurance plans are further divided into the following four variants –
    Name of the variantMeaning
    Level term insurance planTerm plan where the sum assured remains constant throughout the policy tenure
    Increasing term insurance planTerm plan where the sum assured increases during the policy tenure
    Decreasing term insurance planTerm plan where the sum assured decreases during the policy tenure
    Return of premium term planTerm plan where the premiums paid during the policy tenure are refunded back if the insured survives till maturity

    Term plans are, therefore, divided into different variants depending on the coverage that they provide. The goal of all variants, however, remains the same which is financial security or income replacement.

    In the case of life insurance, however, different variants fulfil different life goals. Endowment plans allow you to create wealth through guaranteed returns while money back plans provide you liquidity. Child plans promise a corpus for your child even when you are not around while unit-linked plans help you gain investment returns. Thus, you can choose different plans depending on your different life goals.

  • PremiumTerm insurance plans cover only the risk of premature death. That is why they have extremely low and affordable premiums. You can easily buy high sum assured levels at affordable premiums.

    Other life insurance plans have a wider scope of coverage as they also promise a maturity benefit. The premiums are, therefore, higher than term plans.

  • Coverage durationTerm plans come with long term coverage durations which can go up to 30 or 35 years. Other types of life insurance plans, however, can be taken for shorter durations too as the tenure starts from 5 years and goes up to 30 years.
  • Paid-up and surrenderUnder term plans, there is no paid-up value or surrender value. If you discontinue paying the premium, the plan would lapse and if you don’t revive it the coverage would be terminated. When the coverage is terminated you don’t get anything in return for the premiums already paid.

    Other life insurance plans, however, give you some benefits even if the premiums are discontinued. If you have paid the premium for a specified minimum number of years and then discontinue the premiums, your policy would become paid-up. Under a paid-up policy, the sum assured would be reduced but the policy would continue. You can also voluntarily terminate the policy by surrendering it. When you surrender, you would get a surrender value.

  • Bonus and other additionsThere are no bonuses or other types of additions under term plans. In case of death, the basic sum assured is paid. Under other types of life insurance plans, like an endowment, money back or child plans, you can get bonus additions, loyalty additions, guaranteed additions, etc. These additions enhance the policy benefits.
  • Flexibility Term plans are quite rigid in the sense that they do not have any paid-up or surrender value and do not pay any maturity benefits. Life insurance plans, on the other hand, are flexible. Traditional life insurance plans promise a paid-up value and a surrender value. You can also avail policy loans under such plans. Moreover, if you choose ULIPs, you can also withdraw partially, switch or pay additional premiums.

The difference between term insurance and life insurance can be summarised in the following table too-

Term insurance v/s life insurance– the differences

Points of differenceTerm insuranceLife insurance
CoverageOnly premature death is coveredBoth premature death and survival until the policy tenure are covered
PremiumsVery low and affordable. In fact, term plans are the cheapest type of life insurance plansPremiums are higher than term plans
Maturity benefitUsually not payablePayable under most plans
Death benefitPayablePayable under all plans
TermRanges from 10 years to up to 35 yearsRanges from 5 years to up to 30 years
Paid-up /surrenderThe plan does not acquire any paid-up value or surrender valueIf premiums are discontinued after a specified number of years, the plan acquires a paid-up value. If the plan is surrendered thereafter, a surrender value is paid
FlexibilityNot very flexibleVery flexible

Term insurance v/s life insurance – the similarities

The only similarity between term and life insurance plans is their tax benefits. Under both plans, the premiums paid are allowed as a deduction under Section 80C up to INR 1.5 lakhs. Moreover, the death or maturity benefit received is also tax-free under Section 10 (10D).

Which one to choose – term insurance v/s life insurance

To choose one plan over the other is a mistake. Term insurance and life insurance plans have their own relevance. A term insurance policy is a must for everyone as everyone needs financial security against the possibility of premature death. Thus, term insurance plans should be bought by everyone. In case of other life insurance plans, however, the target customers should be the following –

Type of life insurance planTarget audience 
Endowment planIndividuals who have a low-risk appetite and want to create a guaranteed corpus
Money-back planIndividuals who have a low-risk appetite, want to create a guaranteed corpus but also need liquidity over the term of the plan
Whole life planIndividuals looking for a lifelong cover
Child plansParents who want to create a guaranteed corpus for the future of their child
Unit linked plansInvestors who have a high-risk appetite and want to maximise their wealth with market-linked returns
Pension plansIndividuals who want to create a retirement corpus and/or create a series of regular incomes post-retirement

Term insurance plans are, therefore, quite different from life insurance plans. You should understand the difference between term insurance and life insurance and then choose the most relevant plan for your coverage needs. Term insurance has a universal need and should not be missed. In case of other types of life insurance plans, though, assess your financial goal and then choose a plan which matches your goals and aims to fulfil it.

Frequently Asked Questions

  1. Can I buy both term insurance as well as another type of life insurance plan?Yes, you can buy as many types of life insurance plans that you like.
  2. If I have a term plan and a money-back plan would I receive a death benefit under both plans?Yes, in case of death, you would receive a death benefit under both term plans as well as money back plan.
  3. What is the tax –free limit on the benefits received from life insurance plans?There is no limit on the number of benefits to which you can claim tax exemption. Whatever death or maturity benefit that you receive from your life insurance policy would be completely tax-free in your hands.

Surrender Value Definition Features Online Calculator

Sidharth Hampanavar

Life insurance policies are long-term financial products. Besides pure protection plans, there are other products offered by insurance companies that come with savings or investment component involved. Savings plus protection plans offered by insurance companies such as endowment plans, money-back policies and unit-linked investment plans (ULIPs) are purchased with an objective of availing protection and building wealth for future. However, sometimes you may have to liquidate the investments made for your long-term goal for various reasons such as financial hardship, change in investment preference and plans of investing in a better alternative. Terminating the insurance plans before its maturity is termed as surrender. Are you wondering what will happen on surrendering the insurance policy? Not to worry! Here is everything that you need to know.

What is the surrender value?

Every insurance policy acquires a surrender value on completion of a certain specific period. So, what is the surrender value?

Surrender value if the sum of money that is payable by the insurance company when you terminate your insurance policy before its maturity. Generally, most of the traditional insurance plans can be surrendered for cash after completion of three policy years. That means policy acquires surrender value on completion of the first three years.

Understanding the surrender value in traditional insurance policies

When you surrender the policy after completion of three years, higher of the guaranteed surrender value or special surrender value will be paid in case of traditional policies.

Types of the surrender value

There are two types of surrender value called Guaranteed surrender value and a Special surrender value

  1. Guaranteed surrender value: The amount of money guaranteed to be payable by the insurance company on surrendering the insurance policy before completion of maturity. Guaranteed surrender value is determined based on the surrender value factor specified in the policy document. The surrender value factor is the percentage of total premiums paid. Surrender value factor increases with the number of years of the policy. Surrender value factor will get close to 100% of premiums paid when the policy nears maturity.Hence, the guaranteed surrender value is calculated as total premiums paid multiplied by the surrender value factor.
  2. Special surrender value: Special surrender value is usually higher than the guaranteed surrender value. However, it depends on the insurance company. Special surrender value depends on the sum assured, premiums paid, policy term and bonuses. Generally, special surrender value is calculated,Special surrender value = (Paid-up value + accrued bonuses) X surrender value factor

    Where paid-up value = Basic sum assured X (Number of premiums paid/Number of premiums payable)

Understanding the surrender value in unit-linked investment plans

Unit linked investment plans are insurance products that come with savings and insurance component. ULIPs are structured differently than that of traditional insurance plans. ULIPs invest in various financial instruments such as equity and debt through various fund option. ULIPs come with five year lock-in period.

  1. Surrendering the ULIP plans before the lock-in period involves discontinuation charges. The surrender value will be equal to fund value on the date of surrender after deduction of discontinuation charges
  2. Surrendering the ULIP plans after the lock-in period involves no charges. Hence, the surrender value will be equivalent to fund value on the date of surrender

Surrender valuecalculator

The surrender value of life insurance policy can be calculated easily using an effective online tool called surrender value calculator. You can access the surrender value calculator online on the website of an insurance company. You need to provide some of the basic information to calculate the surrender value instantly. All you need to provide is your contact details, plan name, policy term, number of premiums paid, premium payment mode, premium instalment amount and number of years the policy has completed. Once you submit the details, the surrender value calculator instantly calculates your policy’s surrender value.

What do you stand to lose on surrendering the life insurance policy?

When you surrender the insurance policy before its maturity for whatever reason, you stand to lose on certain benefits. Following are the benefits that you devoid by seeking premature termination or surrender of policy:

  • As soon as you surrender, your risk cover benefit will cease
  • Calculation of surrender value considers premium paid and in certain case bonuses but only up to the extent of surrender value factor. Hence, you will partially lose out on whatever you have already invested
  • You will lose on the yearly tax benefits that you receive on premium payment

As you lose out on many benefits, consider surrendering the insurance policy only if the decision makes a financial sense.

Frequently Asked Questions (FAQs)

  1. What is the free-look period in life insurance policies?Free-look period is the time given by the insurance company to its new policyholder to terminate the insurance contract without any penalties if they are not satisfied with the terms and conditions of the policy. However, even if you are cancelling the plan within the free look period, it’s important to provide the proper reason for rejection.
  2. What does ‘paid-up value’ in insurance mean?Paid-up value is the proportionally reduced amount of sum assured when you discontinue making the premium payment. However, when the policy is converted in to paid-up policy, policy will stay in force till maturity even without paying a premium but with reduced sum assured.
  3. What is the fund value in unit-linked investment plans (ULIPs)?The fund value is the value of a number of fund units held in your policy. ULIPs invest a portion of your premium into various funds.
  4. What are the documents that you need to provide for surrendering the life insurance policy?The requirement of documents may depend on the type of policy you have purchased. However, some of the common documents required for surrender are:
    1. Policy surrender form duly filled and signed
    2. The original insurance policy document
    3. Bank details with cancelled cheque leaf to receive the payment
    4. Pan card
    5. Address proof
  5. Does term insurance has a surrender value?No. Term insurance being the pure form of insurance that offers no savings element has no cash surrender value benefit to offer.

What is an Insurance Premium?

Ankita Sejpal

Insurance is a means of availing financial protection against various risks. But the protection comes for a cost. Insurance companies pool the money from many insured individuals or entities and then use the pooled money for paying out the losses whenever an insured event takes place. The cost that you incur for availing the insurance is termed as insurance ‘premium’, which is structured based on many factors. Let’s learn about the insurance premium in detail. So, what is an insurance premium?

What is an insurance premium?

The insurance premium is the sum of money or the consideration paid by an individual or business to the insurance company in order to avail the insurance policy. Basically, premium is the amount charged by insurance companies periodically for providing the protection. Premium is structured based on various elements. Insurance premiums vary from one type of insurance to another and from one insurance company to another. Generally, insurance companies allow you to pay the premium periodically – monthly, quarterly, half-yearly and yearly. The frequency may vary depending on the terms and conditions of the insurance policy. In some cases, insurance policies can be availed for single premium payments also. Let’s how insurance premiums are calculated.

How insurance premiums can be calculated?

Insurance premiums are determined depending on various factors considered in each type of insurance plan. Premium rates may vary from one insurance company to another as the underwriting process varies from company to company. The factors that are considered for life insurance and factors that are considered for general insurance are different. Hence, the insurance premium calculation and the underwriting process vary for each type of insurance. In general, the following is the way through which premiums are determined.

  • Each insurance application goes through an underwriting process
  • Underwriters gather all the required information and investigate about health history, vehicle reports and medical reports and many more such data
  • Collected data will be analysed by actuaries. Insurance actuaries are the professionals who analyse the financial risk or claim risk on the basis of statistics, mathematics and financial theories
  • Probability of claim will be assessed by the insurance actuaries
  • Depending on the claim probability insurance premium will be determined. Higher the probability of an insurance claim, higher will be your premium cost and vice versa.

Factors affecting insurance premium

Factors based on which insurance premiums are determined to vary from one insurance type to another. Insurance coverage amount and the type that you are seeking is one of the primary and common factors based on which premium is determined for any type of insurance policy.

Let’s consider life insurance policies. In life insurance plans, the premium is determined based on various factors such as coverage amount, your age, gender, smoking habit, the place where you live, lifestyle, health reports, family health history and driving record.

Premium increases with a rise in quantum of risk. For example, the premium charged on a term insurance policy purchased by 25-year-old healthy man will be reasonably lower than the premium charged for the same policy purchased by a 35-year-old man. With the increasing age, health deteriorates thus the risk of claim also rises. Certain habits like smoking and alcohol consumption that can put one’s health at risk increases the probability of a claim. Hence, smokers are charged relatively more premium than non-smokers.

Let’s consider non-life insurance policy, say motor insurance plan. Factors that affect your motor insurance premiums are geographical location, age, gender, marital status, driving record, previous claim history, vehicle type, vehicle usage and coverage chosen and many more. If you consider travel insurance plan, premiums are determined based on factors such as coverage type, age, trip duration, the destination of travel, high-risk hobbies and many more.

More the risk more is the insurance cost. For example, inexperienced drivers are charged more premium compared to experienced drivers as they pose more risk of accidents. Teenagers are considered as ‘high-risk’ category as they have no or less driving record/experience. Each factor that affects your insurance premium is weighed differently.

When it comes to renewable insurance policies (most of the general insurance policies are annually renewable), insurance companies consider the previous claims made. Premium may increases after the policy period ends. That means renewal premium could increase depending on the previous claims made. In case, providing a coverage looks riskier, then the insurance company increase the cost to provide the same type of coverage which was given earlier.

The Insurance premium is an important consideration at the time of buying any insurance policy. It’s important to buy the right and affordable insurance policy. Knowing more about the insurance premium, calculation and the factors that affect the insurance premium helps you understand the product better.

Frequently Asked Questions (FAQs)

  1. Can you control risk factors that affect your insurance premium?

    Factors such as age and gender affect the insurance premium are not under your control. However, there are many factors that influence your premium can be controlled. Practising a healthy lifestyle, building a good credit score, maintaining a good driving record and choosing the right coverage are some of the main factors that can be controlled and premiums can be reduced.

  2. What are the factors that affect health insurance premium?

    There are various factors that affect the health insurance premium. Some of the major factors that affect health insurance premium are age, gender, coverage type chosen, body mass index, usage of tobacco, pre-existing ailments, family health history, profession and place in which you live.

  3. How can you calculate insurance premium?

    For the calculation of the insurance premiums, there is an effective tool available online called ‘insurance premium calculator’. Depending on the category and type of insurance that you need, you need to provide certain basic information regarding your personal profile and coverage requirements. With the details provided, the tool calculates the premium instantly.

  4. How does vehicle size affect your motor insurance premium?

    In an accident, large cars are considered to be safer than small cars. Hence, large cars with highest safety rating come at a relatively lesser amount of premium than that of the small car with a similar rating. However, the premium is based on various other factors also.

  5. In a term life insurance, what happens if you discontinue premium payment?

    In a term insurance plan, if you discontinue your periodic premium payment, automatically policy will lapse and the cover will be ceased.

What is General Insurance? Definition, Features, Types & Benefits

Sidharth Hampanavar

The insurance segment in India is divided into two categories – life insurance and general insurance. While life insurance policies cover the financial loss suffered due to loss of life, general insurance policies cover the financial loss suffered due to the loss of an asset. General insurance, therefore, covers the loss of economic value of assets or the financial loss suffered due to specific contingencies. General insurance has different types of plans, each of which is designed to cover specific risks. So, let’s understand the concept and the types of general insurance plans in India.

What is general insurance?

General insurance is the insurance of assets, financial assets included. If, due to a contingency which is covered under the plan, there is an economic loss, the loss is compensated by general insurance policies.

Top advantages of general insurance plans

General insurance plans are beneficial because of the following reasons –

  • The plans cover financial losses and compensate you for the losses that you suffer. As such, general insurance plans provide you financial security even in the case of contingencies
  • In some cases, general insurance plans are mandatory by law. For instance, motor insurance plans are mandatory as per the Motor Vehicles Act, 1988. Similarly, if you are travelling to Schengen countries, you mandatorily need a valid overseas health insurance plan. When you buy such mandated plans, you fulfil the legal obligation and save yourself from violation offence
  • General insurance plans help in protecting your savings in emergency situations. You can, therefore, use your savings to fulfil your financial goals
  • Health insurance plans, which are a type of general insurance plan, allow you tax benefits. The premiums paid for such plans are allowed as a deduction under Section 80D. This deduction helps in lowering your taxable income which, in turn, lowers your tax liability and helps you save tax.

Types of general insurance plans

There are a lot of general insurance plans available in the market. However, the popular and the most important ones are as follows –

Health insurance 

Health insurance plans cover the medical expenses which you incur if you fall ill or are injured and need medical assistance. Since the cost of medicine is very high, health insurance plans prove very beneficial. They pay for the medical expenses thereby saving your finances from the strain of the costs incurred on your treatments.

Features of health insurance plans

Here are some of the common features of health insurance plans –

  • Health plans can be taken to cover yourself as well as your family members
  • Expenses incurred on room rent, surgery, nurse’s fees, doctor’s fees, ambulance, day care treatments, etc. are all covered under health insurance plans
  • The premiums paid are allowed as a deduction. You can claim a deduction of up to INR 1 lakh by paying health insurance premiums for yourself, your family and dependent parents.
  • There are different types of health insurance plans available in the market. These include the following –
  • Individual health plans which cover a single individual
  • Family floater plans which cover the whole family
  • Senior citizen plans which cover senior citizens
  • Covid-19 specific health insurance plans
  • Critical illness plans which cover specified critical illnesses
  • Disease specific plans for specific diseases
  • Top-up and super top-up plans for supplementing an existing coverage
  • Hospital cash plans which pay a daily benefit in case of hospitalisation

How much does health insurance cost?

The premiums of a health insurance policy are calculated based on the following factors –

Factors affecting premiumsHow premiums are affected
Age of the insuredHigher the age, higher would be the premiums and vice-versa
Sum insured selectedHigher the sum insured, higher would be the premium and vice-versa
Coverage benefitsMore the coverage features, higher would be the premium and vice-versa
Number of members coveredMore the members covered, higher would be the premium and vice-versa
Medical historyIf you or any covered member has an adverse medical history, the premium would be higher
Discounts availableHigher the discounts offered by the plan, lower would be the premium and vice-versa
Type of policyThere are different types of health insurance plans and the premiums are different for different plans

Motor insurance

Motor insurance plans are general insurance plans for vehicles. These plans are mandatory as per law and have to be bought for every vehicle so that the vehicle is allowed to run on Indian roads.

Features of motor insurance plans

  • There are two types of policies available in the market – third party liability and comprehensive
  • Third-party plans are legally mandatory while comprehensive plans are voluntary
  • Third-party plans cover only the financial liability suffered if you harm any individual or third party property
  • Comprehensive plans also cover the damages suffered by your vehicle itself
  • There are different motor insurance policies covering cars, two-wheelers and commercial vehicles

How much does motor insurance cost?

Motor insurance premiums are determined based on the following factors –

Factors affecting premiumsHow premiums are affected
Type of policy chosenThird-party plans have lower premiums compared to comprehensive ones
Make, model and variant of the vehicleThe make, model and variant determine the value of the vehicle. Higher the value, higher would be the premium and vice-versa
Age of the carOlder the vehicle, lower would be the premium and vice-versa
Add-ons selectedComprehensive plans offer optional additional coverage benefits. If the benefits are selected, the premiums would increase because each add-on has an additional premium
Discounts availableHigher the discounts offered, lower would be the premium and vice-versa
Registration locationVehicles registered in metro cities have higher premiums than those registered in non-metro cities

Travel insurance

Travel insurance plans are those which cover financial emergencies that you face when you are travelling to another place. These plans, therefore, cover your trips against unforeseen emergencies.

Features of travel insurance plans

  • Travel insurance plans can be of the following types –
  • International travel insurance plans
  • Domestic travel insurance plans
  • Student travel insurance plans
  • Senior citizen travel insurance plans
  • Single trip policies
  • Annual multi-trip policies
  • Coverage under travel insurance plans include the following common benefits –
  • Medical emergencies
  • Medical evacuation and repatriation
  • Loss of checked-in-baggage
  • Delay of checked-in baggage
  • Loss of passport
  • Personal accident
  • Third-party liability
  • Trip cancellation or curtailment
  • The policy covers you for the duration of your trip
  • You can also cover family members going on a trip with you under the same plan

How much does travel insurance cost?

Premiums of a travel insurance policy depend on the following factors –

Factors affecting premiumsHow premiums are affected
DestinationPremiums depend on the destination of your trip. Developed countries like UK, USA, Australia have higher premiums
Number of members travellingHigher the number of family members being covered under the plan, higher would be the premium and vice-versa
Age of the membersHigher the age of the members covered, higher would be the premium and vice-versa
Trip durationLonger the duration of the trip, higher would be the premium and vice-versa
Sum insuredHigher the coverage amount, higher would be the premium and vice-versa
Coverage featuresHigher the number of coverage benefits under the plan, higher would be the premium and vice-versa
Type of policyDifferent travel insurance plans have different premium rates
Medical historyIf you or any family member suffers from any medical condition, premiums would be increased

Home insurance

Home insurance plans cover the financial losses that you suffer in case of your home and/or its contents are damaged. Home insurance policies, therefore, provide financial coverage against natural and man-made disasters which cause a loss to your house property.

Features of home insurance

  • There are three types of home insurance policies. They are as follows –
  • Structure insurance which covers the structure of your home
  • Contents insurance which covers the contents of your home
  • A comprehensive policy which covers both structure as well as the contents of your home
  • The policy covers natural calamities like earthquakes, floods, storms, cyclones, etc.
  • Man-made calamities are also covered like fire, theft, riots, etc.
  • The policy can be taken on a replacement value clause or market value clause

How much does home insurance cost?

Premiums for home insurance policies depend on the following factors –

Factors affecting premiumsHow premiums are affected
Type of policy selectedThe type of policy that you select would determine the premium payable
Age of the houseOlder houses have lower premiums and vice-versa
LocationLocation of the house determines its construction cost. If the property is located in a prime location the premiums would be higher
The expected cost of constructionThe expected cost of construction determines the premium rate. The higher the cost the higher would be the premium
Coverage amountHigher the coverage amount is chosen, higher would be the premium

Fire insurance

Fire insurance policies cover the damages caused by fire and other related perils. The policy covers damages suffered by property or specified assets.

Features of fire insurance plans

  • The policy covers the cost of repairs or replacement of the insured asset when it is damaged by fire or related perils
  • There are different types of fire insurance policies which include the following –
  • Valued policy
  • Floating policy
  • Specific policy
  • Comprehensive policy, etc.
  • A fire insurance plan also covers damages suffered due to lightning, floods, storms, cyclones, inundation, impact damage, missile testing operations, etc.
  • If any third party property is damaged due to fire or other covered perils, the policy would cover such losses too
  • There are various extensions which are available under fire insurance plans. These extensions come at an additional premium. You can add as many extensions that you like to enhance the coverage.

How much does fire insurance cost?

The premiums of fire insurance policies depend on the following factors –

Factors affecting premiumsHow premiums are affected
Location riskIf the property is exposed to the risk of fire due to its location, the premium would be high
Value of the insured assetThe premium depends on the value of the asset being insured under the plan. Higher the value, higher would be the premium
Extensions selectedIf extensions are added to the policy, the premium would increase
Type of assetThe type of asset being insured also affects the premium rate

Other types of general insurance policies

Besides the above-mentioned plans, there are commercial general insurance policies too. These policies include the following –

  • Marine insurance
  • Commercial General Liability Insurance
  • Directors and Officers Insurance
  • Cyber risk insurance
  • Professional Indemnity Insurance
  • Group insurance plans, etc.

How to buy general insurance plans?

General insurance policies can be bought offline or online. Buying offline means buying through general insurance agents or by visiting the branches of the company. This might prove to be difficult and inconvenient. Buying online, on the other hand, is quicker and more convenient as you can buy the policy easily from your home or office.

Turtlemint is an online platform which allows you to buy general insurance policies online. All the popular types of general insurance policies are available on Turtlemint’s platform and you can buy the policy easily. Just visit www.turtlemint.com, choose the general insurance plan that you want to buy, enter your details and you would be able to check the available plans. Turtlemint is tied up with leading general insurance providers which offer multiple types of general insurance plans. Thus, on a single platform, you can see, compare and buy any type of general insurance policy that you need. The premiums can be paid online and you can even get the policy issued within minutes.

Top #4 points to consider when buying general insurance 

When you want to buy general insurance plans, here are some points which you should always keep in mind:

  1. Choose a plan which you require. Health insurance plans are a must and if you have a vehicle you also need motor insurance. Travel insurance plans are relevant when you are going on a trip. So, understand your coverage requirements and then buy a plan
  2. Ensure that the coverage level is optimal to cover your financial losses
  3. The premiums of the plan should be affordable so that you don’t face a financial strain in paying for the policy
  4. Always compare before buying. There are different policies available in the market and each policy offers something better than the other. When you compare you would be able to find the best general insurance policy which not only provides extensive coverage but also comes at a lower premium. So, don’t forget to compare. Turtlemint allows you a platform to compare the different types of general insurance policies available. You can check the plans for their coverage benefits and premiums and then buy.

Documents needed to buy general insurance plans

You would need the following documents to buy a general insurance policy –

  1. Proposal form for the policy
  2. Identity proof
  3. Age proof
  4. Address proof
  5. Details of the asset which is being covered
  6. Photographs
  7. Other documents depending on the type of policy that you buy

General insurance plans are the ideal solution for covering your financial risks. The different types of general insurance policies provide coverage for all possible types of financial risks that you might face. So, choose the policies that you require and invest in general insurance for financial security.

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