Insurance FAQ

1.What is term insurance?

Term insurance is a basic type of insurance coverage that you can buy, as the name implies, for a specified period of time. Term insurance is strictly insurance, and has no cash value. It also offers the lowest premiums. When a term life insurance policy expires, you must renew it to continue the coverage, and premiums increase in proportion to your age.

2.What kind of life insurance should I buy?

If you have long-term needs - for example, if you require life-long protection for premature death, retirement income or cash to settle your estate - then you should consider cash value insurance. Likewise, if you need protection for a specified period of time, perhaps to pay off a loan or mortgage in the event of your death, term insurance may be the right choice for you. Apply now to get a free quote on term life insurance at affordable rates.

3.How much life insurance do I need?

The appropriate amount of life insurance varies from person to person, depending upon your individual needs and your family's lifestyle. To determine how much coverage you need, multiply your annual income by five or tally the assets that will pass to your heirs, such as Social Security, savings, real estate, and other benefits. The best way to establish a precise and adequate amount for life insurance coverage is to consult with your insurance representative.

4.If I miss a premium payment, will I lose my insurance coverage?

If you pay the premium within the grace period following the due date, you will not be subject to a penalty or loss of coverage.

5.When can my policy lapse and what can I do if this happens?

Your policy can lapse or terminate when a premium is not paid by the end of the grace period, if the policy has no cash value. If the policy has adequate cash value, you can borrow against it to pay the premium and maintain your insurance. You could also use one of the policy's non-forteiture options which allow you to: (1) surrender your policy and collect its cash value; (2) purchase a reduced amount of paid-up cash value life insurance; or (3) purchase the same amount of term insurance that you purchased originally and extend your coverage for a specified time period.

6.Can I have a lapsed policy put back into effect?

Yes, If you provide the insurer with evidence or insurability and pay all back-premiums plus interest. This is called "reinstatement" and can occur anytime within five years from the date your policy lapses. The advantages of reinstating a lapsed policy are: (1) you pay the original premium rate; (2) the cash value of the original policy will be greater than that of a newly issued policy; and (3) you may be charged a lower interest rate on loans against your policy.

7.When can I borrow against my life insurance policy?

Cash value life insurance policies can be used to obtain a loan. The loan amount and time at which you can borrow depend on the amount and type of insurance you have, as well as your age. Guaranteed loan values are outlined in the policy contract.

8.What tax advantages are offered by life insurance?
Deductions from gross income
Sec 80C

Deduction is available amounting to Rs. 1,00,000/-
The benefit for life insurance premium u/s 80 C is restricted to 20% of the actual capital sum assured. Surrender of Plan before premium has been paid for two years will result in reversal tax benefit.

  • Deduction in respect of contribution to pension funds
  • Maximum Rs. 1,00,000/-
  • Surrender/Withdrawal will be subjected to tax.
  • Pension received will be subject to tax.
Sec 80 CCE

Under Section 80CCE, the overall limit for deduction u/s 80C, u/s 80CCC and u/s 80CCD is Rs. 1,00,000/-.

  • Deduction in respect of medical insurance premium
  • Individual or HUF whether resident or non resident
  • Premium can be paid by any mode other than cash
  • Premium paid out of income chargeable to tax.
  • For normal individuals the maximum deduction is Rs.15,000/- and for senior citizens age 65 years and above the deduction is Rs. 20,000/-.

Additional deduction allowed for individuals for taking health insurance for parents as under:
Where parents are aged below 65 years      Rs. 15,000/-
Where parents are aged 65 years & above      Rs. 20,000/-

Exemption from the proceeds
Commuted pension: 10(10A)(iii)
One-third of the Value at vesting date would be tax-free
  • Any sum received from Life insurance policy as maturity proceeds, death benefits.
  • Proceeds of key man insurance is taxable
  • Single premium policies will be taxed as income in the year it is received assuming the premium exceeds 20% of the sum assured.
  • An Insurance policy in respect of which the premium payable for any of the years during the term of the policy exceeds 20 % of the actual capital sum assured will not be eligible for Sec 10(10D) benefit. This will not be applicable for any sum received on the death of a person.
9.Do my children need life insurance?

It may be wise for children to have cash-value policies in their names since they can secure relatively low premium rates, which will not increase as they age. Also, a Guaranteed Insurability benefit can be added to the policy so the child can purchase insurance in the future. The need to accumulate funds, family medical history and financial circumstances are important considerations that help to determine whether life insurance makes sense for your children.

10.Can I get full refund of premium if I cancel my policy within the free look period?

Yes, under the free look period, you can cancel your life insurance policy within 15 days by returning the policy to the life insurance company after you have received the policy document.

11.How much will I receive if I surrender my life insurance policy?

When a life insurance policy is in force for a number of years (normally a minimum of five years) it would acquire a cash value. The cash value is the 'savings' portion of a life policy. It is derived when your premium payments are more than the cost of insurance, whereby the excess goes into a cash value account and draws interest. If you decide to surrender your life insurance policy, the life insurance company will pay you the cash value, also known as surrender value. You will suffer a loss if you surrender your policy before the maturity period.

12.How do I make a claim?

You should fill out a claim form and contact the financial adviser from whom you bought your policy. You need to submit all relevant documents such as original receipts to your insurer to support your claim. If your insurer can settle your claim, you will be issued a cheque generally within 7 days from the time they receive all relevant documents. However, if your insurer is unable to deal with all or any part of your claim, they will explain to you in writing