Is it important to have additional life insurance cover?

As you advance through different stages of life, your responsibilities and priorities change, thereby necessitating a review of your finances. Here are some milestones which demand a revisit to your insurance cover…

As a youngster, you may not have many financial responsibilities. However, as you grow older, you tend to assume additional responsibilities associated with spouse, children, retired parents and so on.  In such a scenario, the existing life insurance cover many not be enough to cover your new responsibilities. To ensure you enjoy a sufficient insurance cover at all times, indicated below are a few milestones on reaching which you need to review your existing insurance coverage:

Becoming a spouse

Along with all the happiness, married life also brings with it additional responsibilities. If you are the only earning member, it is crucial for you to be adequately insured so that your family is secure in case of an unfortunate event. Even in case of couples wherein both members are earning, the unexpected loss of a spouse could place the other in financial distress. Getting additional insurance once you marry will ensure your peace of mind and help you cope with your added responsibilities.

Becoming a parent

When you are blessed with children, your responsibilities increase. Your children are dependent on you for a very long period of time. Along with routine expenses, you would have to save lump sums of money for their education, marriage, etc. Having adequate insurance which would help you achieve these desired goals will ensure that their dream will not remain unfulfilled even in your absence.

Life insurance as “tax planning” - termplans's Blog - Blogster

Life insurance as “tax planning” - termplans's Blog - Blogster

Life Insurance also serves as an excellent mechanism for saving taxes. The Government of India has offered tax incentives to life insurance products in order to facilitate the flow of funds into productive assets. Under Section 88 of Income Tax Act 1961, an individual is entitled to a rebate of 20 per cent on the annual premium payable on his/her life and life of his/her children. The rebate is deductible from tax payable by the individual or a Hindu Undivided Family. This rebate is can be availed up to a maximum of Rs 12,000 on a payment of yearly premium of Rs 60,000. By paying Rs 60,000 a year, we can buy anything upwards of Rs 10 lakh in the sum assured (depending upon the age of the insured and term of the policy.) This implies that we get Rs 12,000 as a tax benefit. But many people make the mistake of burdening themselves with too many life insurance policies to the detriment of the quality of their lives while they’re alive.

Having come to terms with the importance of insurance now comes the dilemma of which insurance policy to choose since the Indian market is already saturated with about 23-odd players, each offering some benefit or the other. This is where IndiaFirst Life, a joint venture between Bank of Baroda, Andhra Bank and UK’s Legal & General, steps in to clear the worries and offer simple easy-to-use solutions. With its “customers first” approach, IndiaFirst Life insurance plan has adopted a simple and transparent approach, doing away with technical jargons and huge policy statements which confuse and confound a customer. At IndiaFirst Life, rather than we telling the customer about an insurance benefit, the customer is the one who chooses an insurance policy. We follow a simple process by which the customer looks into the various policies on our website and makes a choice according to his requirement. 

There is not trouble of going through elaborate policy statements involved in this process. Our main is to provide reasonable and honest deals to the customers and not coax him into taking up a policy which he does not want.

Remember, an insurance acts like a ceiling above your head providing you the shelter and protection from any untoward incident. With life having become fast paced nowadays, there are very few things we can hold on to. Our life’s pleasures have become momentary now and if we want to enjoy them for a prolonged time, we must ensure that the little necessities of our life are well insured.

 

Life insurance as an “investment” option

Life Insurance is an attractive option for investment. While most people recognize the tax saving potential of insurance, many are not aware of its advantages as an investment option as well. Insurance products yield more funds compared to regular investment options, and this is besides the added incentives offered by insurers. 

In life insurance, unlike non-life products, we get maturity benefits on survival at the end of the term. In other words, if we take a life insurance policy for 20 years and survive the term, the amount invested as premium in the policy will come back to us with added returns. In the unfortunate event of death within the tenure of the policy, the family of the deceased will receive the sum assured.

Now, let us compare insurance as an investment option. If we invest Rs 10,000 in PPF, our money grows to Rs 10,950 at 9.5 per cent interest over a year. But in this case, the access to our funds will be limited. We can withdraw 50 per cent of the initial deposit only after 4 years.

Planning for lives while we are alive-Term life Insurance

Term Life Insurance is an agreement between the insurer and policy holder that guarantees payment of a stated amount of monetary benefits at the end of a specified term or on the death of the policy holder. Life Insurance provides for financial security in the event of death or on the inability to earn due to physical disabilities.

Taking a life insurance responsibly can help us live the life we want to and protect our family after we are not there. Without life insurance many people would be left destitute in the event of an unexpected disaster. Besides providing for financial security in the case of one's untimely death, it can be used to accumulate a kitty for the old age, systematically build assets for funding one’s child's education and also for saving on taxes.

Premium table for IndiaFirst Anytime Plan

 Premium table for IndiaFirst Anytime Plan:

Age and Term		5	10	15	20	25	30
30		3,472	3,472	3,675	4,012	4,416	4,888
35		4,180	4,416	4,922	5,630	6,338	7,045
40		5,832	6,405	7,416	8,529	9,675	10,787
45		8,461	9,843	11,495	13,214	15,001	-
50		13,517	15,574	18,068	20,832	-	-
55		20,562	23,967	28,147	-	-	-

                                            

The mode of premium payment and the premium payment frequency of term insurance will also impact the premium amount. Following are the premium frequency factors for monthly and six-monthly that will apply to the annual premium amount.

Premium	Factor to be applied to the
frequency	yearly insurance premium
Monthly	0.0870
Six monthly	0.5119