Life Insurance

“When a group of people pay less money insuring one another a collectively Huge money on a person’s demise”



    Knowledge Wheel

    Sum Assured

    Sum assured is the amount of money assured for the policyholder. If the policyholder faces any uncertain situation, the sum assured is paid to the nominee.

    Premium

    Premium is the amount of money that the policyholder has to pay to the insurer. The policyholder can choose to pay yearly, half-yearly, or pay a big amount in total.

    Insurer

    An insurer is a financial institution that manages the life insurance policy. The insurer assures a specific amount of up to 2Cr to the life assured. If the policyholder faces any uncertain situations the nominee receives the sum assured.

    Policyholder

    A policyholder is a person who buys the policy from a financial institution. Policyholder is the sole person who is responsible to pay the premium and assign the nominee to claim the sum assured.

    Nominee

    A nominee is a person who receives the sum assured. It depends on the policyholder that determines the sum assured. The policyholder has to choose a bank that has a high claim settlement ratio.

    Claim settlement ratios

    The claim settlement ratio is the rate at which the bank settles the sum insured. The number of settlements divided by the number of claims is how CSR is calculated.
    CAFS Life Insurance

    Life Insurance

    Life insurance is an agreement between three parties (Insurer, Insured, and the nominee). Insurer assures that during the death of a person a sum assured up to 1 Cr is paid. For which, the insurer collects the money every year called a premium.

    The insurer pays the assured amount up to 1 Cr to the nominee. In most cases, nominees would be the immediate family members of the insured.

    Have any Question? Ask us anything, we’d love to answer!

    Who provides Life insurance

    A financial institution like Bharathi Axa provides life insurance. A life insurance policy is an agreement between a bank and a person. The person is generally known as the life assured. The bank requires a detailed health report of the person. The report plays an important role in calculating the persons’ sum assured.

    Sum assured is determined based on the persons’ current health condition. The insured person pays a regular amount every year, half a year, or a big amount before the plan starts. If the insured persons’ life becomes critical the bank pays the promised amount to the family.

    CAFS providers

    Have any Query? Ask us anything, we’d love to answer!

      CAFS Insurance

      Why Life insurance

      Nowadays people life is becoming uncertain. We are prone to outside travel and other health conditions. Yesterday we might have seen a friend, the next day he might have had a terrible event. What could the friend’s family do if he is the only breadwinner of the family? How will the family survive? would he have let the family members suffer If he was alive?

      That is when life insurance comes into help. It is a fact that the person’s life cannot be replaced. But the financial compensation could reduce the pain the family members feel. The amount assured will be paid to the nominee without any hassles. That money will be a huge factor influencing the well-being of the family members.

      The life insurance fee starts from 490 per month. Even a low-income person can avail a life insurance and become a policyholder. That small amount can help his or her family to cherish even after the policyholder’s demise. Thus, any person who cares for his family’s financial situation can buy life insurance. Thus, ensuring the future of his family even after an unforeseen event.

      How life insurance works?

      Let’s assume in a city there are 100 people. Ravi is one among them. Ravi takes insurance of 1Cr up to the age of 54 years after which his son/daughter starts earning. Out of 100 the average demise ratio of people below 55 is 15% (15 policyholders).

      Thus, the claim can be settled from the premium collected by other policyholders. This just like sharing the risk of one individual with a huge group. This is how the life insurance industry runs. Unless a huge disease affects people, the insurance companies can settle claims smartly.

      Other Important terms of Life insurance

      There are few other terms of life insurance. Below is the list of such terms that help to understand life insurance even better.

      Lapsed Policy

      The policy gets terminated when the premium amount is not paid. A particular grace period is given to pay the premium. If still not paid then is policy is called a lapsed policy. There are life insurance companies that offer the facility to revive a lapsed policy. For which, the outstanding premiums are to be paid by the policyholder.

      Grace Period

      It is the extension given by the insurance provider to the policyholder. This is given after the due date of the premium payment. After the policyholder pays the premium sum then the cover of the plan continues.

      Revival Period

      The policy gets lapsed when the premiums are not paid during the grace period. If you want to continue with the plan then you are provided with an option of re-activating the lapsed plan. Yet, it should be completed at a certain time after the end of the grace period. This time frame is known as the revival period.

      Free-look Period

      If you are not comfortable with the terms and conditions of the plan. The policy can be returned within a certain timeframe. That Time frame is mentioned in the policy documents. This time-frame is known as a free-look period. Medical examination, the premium sum will be charged from the policyholder.

      Rider

      The riders are add-ons that enhance the coverage of the plan. These rider benefits are always optional. They enhance the financial security of the family against any unforeseen event. This at an extra premium sum.

      Claim Process

      The life assured loses life during the policy term. The nominee can file a claim to receive the death benefit. This process of claiming sum assured is called as claim process.

      Exclusions

      Certain situations are not covered within a life insurance plan. In case the claim is made in such situations then no benefit is assured by the insurance company.

      Benefits of Life Insurance

      Life protection

      Life is filled with uncertain events that can never be foreseen by us. In every aspect of life, finance is a major conundrum that requires a lot of effort to be tackled. Life insurance acts as a protection for your life and covers all the losses that are caused by these uncertain events.

      Tax Benefits

      One of the biggest pros of getting a life insurance policy is a tax benefit. One of the notable benefits is the exemption that is available for the insurer when he gets life insurance. For instance, section 80 c allows a salaried employee a deduction in the tax that he pays if he gets life insurance. An insurer can get a tax exemption of up to 150,000 rupees.

      Death

      Death is inevitable and everyone faces death at some point in their life on the other hand everyone in this world has people dependent on them. Death can affect a family financially, so when a person insures his life he or she can overcome this event. Moreover, the increasing rate of health issues among mid-aged people has caused great pressure in their minds especially the thought of every parent who worries about their children’s future. For such minds, life insurance is the right way to use their money.

      Discount on the Payment Period

      Every life insurer offers different payment periodicities to its policyholders. They include annual, half-yearly, quarterly, or monthly mode.

      If a policyholder pays the policy premium annually, the company has more time to invest. This means more profits and benefits for the company. This discount is included in the premium amount charged by the insurer.

      Policy for Businessmen

      There are policies that provide an option for business people. The business partners can buy the policyholder’s share without any hassles. In this case, the business partner has to sign an agreement with the life insurer. After selling the policyholder’s share the pay-out will be given to their nominee. Yet, it’s important to understand that the nominee or the dependents won’t get a stake in the company.

      Return on Investment

      compared to other investment options life insurance policy has a better return on investments. In many insurance, company a bonus is offered to their clients. Thus making it a safe and profitable option for investment for the people. Furthermore, one gets profits as well as coverage for an investment.

      Loans

      Another advantage of taking life insurance is one can use their policy documents to get a loan from banks and banks accept such documents to give people loans. In cases where people do not have property or assets, this could be used as an alternative to getting themselves a loan in uncertain times.

      Type of Life Insurance

      Term Insurance

      Term insurance is an insurance policy assured over a period of time as listed in Ravi’s example. A person can opt a policy for a specific period of time. The premium is calculated based on the current health of the person who opts for the policy. Generally, the term plan has a very low premium compared to the sum assured.

      This plan is suitable for a person who wants to secure the financial situation of his/her family members. Once the health of the person is analysed the premium amount is determined. Later, the policyholder has to pay the premium every month. If some unexpected situation happens that the policyholder has demised. The sum insured is passed to the nominee.

      Bharathi Axa term insurance policy is an example of a term insurance policy.

      Whole Life Insurance Plan

      Whole life plans are totally different from term life insurance. As the name suggests, the person is eligible to take insurance for his whole life. The whole life insurance plan acts as saving and as insurance. The policyholder has to pay monthly or annual instalments. Due to any unexpected demise that happens to the policyholder, the sum assured is paid to the nominee. The difference here is that,

      In term insurance, the sum assured is paid only till the fixed period of years. But in whole life insurance, the sum assured is paid irrespective of the time period.

      Another advantage is that the whole life insurance can be kept as collateral. The collateral is considered for a loan from the same bank. As the sum assured is to be paid compulsory to the nominee banks do consider the same as collateral.

      TATA AIA Life Insurance Fortune Maxima is an example of Whole life insurance plan

      Endowment Plans

      Endowment plans are an advancement to the previously discussed insurance plans. The Endowment plans come with an insurance and also a saving plan. From the premium amount some part is invested for savings. Same as the other plans the persons health report is analysed to decide the premium.

      Once the policy is set the policyholder starts to pay the premium amount monthly or annually. With other policies the sum assured won’t be paid if the term period is crossed. But in endowment plan even though the term period is crossed the policyholder receives the returns from the plan.

      Indiafirst life guaranteed benefit plan is an example of Endowment plans

      Money-back Plan

      This plan offers a stipulated percentage of the assured sum. The policyholder receives returns at pre-decided intervals. These returns are known as a survival benefit.

      A money-back policy is for individuals who want investments and liquidity. These plans are eligible for bonuses as declared by the insurer.

      ULIP

      An alternate of whole life insurance is available in the market. It clubs the benefits of life insurance plans with ULIPs. A whole life ULIP gives extensive coverage with high returns.

      Child Plan

      A child plan acts as an investment to generate funds for the policyholder’s child. A child plan helps one build savings for their child that can be used for the child’s education and wedding. Child plans provide benefits as installments on an annual basis or a lumpsum payout.

      The payout is done once the insured child reaches 18 years. In the demise of the policyholder immediate premium payment is payable. Some life insurance providers waive off future premiums. They continue till the opted policy term.

      How to choose My Life Insurance

      Understand your Financial Position

      Life insurance is for a person who wants to ensure the financial position of his or her family. The policyholder should also be able to pay a monthly amount under the insurance plan. Life insurance is very beneficial for the only breadwinner of the family. In such a case, the family is totally dependent on one person.

      Due to unexpected loss, the family could suffer a huge financial crunch. In that case, even though money couldn’t replace a life. The sum insured can be financial support to the family.

      Understanding Needs

      Every family need differ from one another. The same sum assured cannot be enough for two families. The policyholder has to decide the amount of money. The sum assured should suffice the family financial needs without his presence.

      Affordability of Premium

      The policyholder must be able to pay for the premium amount as per the planned period. The lapse of premium can lead to life insurance policy cancelation after grace period. The premium amount will be informed before the plan begins. The policy holder should make sure that he doesn’t default the premium. while thinking about life insurance.

      Choosing the right options

      There is 25+ companies in the insurance industry. The person who wishes to avail a life insurance has to choose the best option. Each company differs on a claim settlement ratio. The policyholder has to make sure he analyses the plan before starting to invest in the same. Check our analysis on top 10 insurance companies in India.

      Understanding the policy

      Once the person has chosen the company to buy life insurance. He/she has to choose a plan that suits his/her needs. Understanding the plan helps the policyholder to get the best out of the plan. Certain riders are linked to the plan can help the policyholder. These riders can help to choose the desired additional benefits.

      What are insurance riders?

      Insurance riders are add-on benefits to the availed insurance plan. Riders are available as per the life insurance policy. The policyholder has to analyze the riders and choose the most suitable one. Every rider comes with an extra cost that the policyholder has to pay.

      Critical illness rider

      If the policyholder feels like he might become very ill in the future. The policyholder can opt for a critical illness rider. With external premium, the policyholder will be able to get double the sum assured. This rider comes with an extra cost with the premium.

      The critical illness differs from one policy to another. The number of diseases covered differs from one policy to another. The policyholder has to understand such information from the advisor. He/ she has to make the right decisions without making unwanted expenses.

      Accidental death benefit rider

      If the policyholder is traveling a lot and feel like he is more prone to accident’s he can opt for accidental death benefit rider. With the additional short premium amount, the policyholder will be able to get double the sum assured. The policyholder has to pay an additional amount to the premium to opt for this rider.

      Waiver of premium rider

      If the insurer could meet a situation where couldn’t pay the premium amount in future. He can opt for waiver of premium rider.

      The policyholder couldn’t pay the premium in the future due to some uncertain situation. This plan could waive of the premium from the date of such instances.

      Disability rider

      If the insurer does lot of travelling and wanted to get insured for disability. This policyholder can opt for disability rider.

      Disability is further referred under certain terms and conditions as per policy. It is advisable for the policyholder to read them thoroughly. The Insurer has to pay an additional amount to the premium.

      Understanding the policy

      Once the person has chosen the company to buy life insurance. He/she has to choose a plan that suits his/her needs. Understanding the plan helps the policyholder to get the best out of the plan. Certain riders are linked to the plan can help the policyholder. These riders can help to choose the desired additional benefits.

      What are the required documents for a life insurance?

      The person who has availed life insurance will be required to submit few documents by the bank. Below is a list of documents required to initiate a life insurance plan.

      • Passport size photo
      • Pan card
      • Aadhar
      • Cancelled cheque with name
      • Income tax return/ Payslip if premium above 1 L

      How to claim the sum assured?

      The most important part of the life insurance is to claim the sum assured. The CSR- Claim settle ratio says about the service quality of the insurance agency. The claiming process includes submitting all the below documents.

      • Death certificate
      • Passport size photo
      • Pan card
      • Aadhar
      • Cancelled cheque with name
      • Income tax return/ Payslip if premium above 1 L