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All one needs to know about life insurance policies

dateKnowledge Centre Team dateJanuary 21, 2021 views298 Views
All one needs to know about life insurance policies

It takes years to build a good life with your family and provide them with the lifestyle they always wanted. You have so many dreams and aspirations for loved ones- buying a house, children’s education, getting them married, and so many other plans. A single catastrophic event such as a loved one’s death can shatter all dreams and bring great emotional turmoil for them. And if it is the sole earning member of the family, there is additional financial stress. Don’t you worry about how your family will fulfill all basic monetary needs and maintain a good lifestyle if you are not here?

These pandemic times have reinstated the importance of healthcare and expenses that a family incurs when a loved one is hospitalized. Many families have lost their loved ones. When a sole earning member of the family passes away, it hits the family differently. Hence more and more people opt for various health and life insurance policies to protect them.

In FY 2019 alone, private insurers earned premiums to the value of over 1,700 billion rupees. According to a 2020 report, the gross premiums collected by life insurance companies are over five trillion Indian rupees. It is interesting to note that as of 2019, India accounts for about 2% of the world’s total life insurance premiums.

In unforeseen circumstances, having a life insurance policy can support the family greatly and provide the much needed financial cushion. Here is a guide to life insurance policies in India and what you must know about them.

Types of Life Insurance Policies

  • Term Life Insurance Plan

    A term insurance plan is the simplest life insurance policy that provides death risk cover. This means that the nominee gets death benefit cover in the unfortunate situation that the insured person passes away during the policy period. This policy is known for a high sum assured at a low premium. Depending on the policy terms, the policy payout will be a lump-sum amount or monthly payouts. This helps the nominee utilize the money to pay off huge amounts such as loans, monthly expenses, children’s education, or marriage expenses.

    Life insurance policies offered by Canara HSBC Oriental Bank Of Commerce Life Insurance have additional features such as long-term financial security, cover for a spouse, accidental death coverage, increased coverage with age, family financial coverage, and tax benefits.

  • Saving Plans

    Saving plans are the best bet if you want to go for investment and insurance. There are following types of saving plans available in India:

1. Endowment Plans

Endowment plans are generally taken for longer periods, such as 10-35 years. If the life-assured outlives the policy term in this type of savings plan, then the insurance company offers them the maturity benefit. If the policyholder’s demise occurs during the policy period, the nominees will receive the entire sum assured.

If you are looking for long-term financial planning and also an opportunity to earn returns on maturity, endowment plans are the way to go.

2. Money-Back Plans

Money-back plans are similar to endowment plans. However, the difference is that they pay the sum assured at periodic intervals rather than as a lump-sum amount. This policy is best if you have short-term financial goals, such as a child’s education or a foreign tour.

  • Unit Linked Insurance Plans (ULIPs)

    ULIP plans are the most popular insurance plus investment plans. It provides you with a great amount of flexibility and is similar to mutual funds. The premium amount is used as insurance, and a part of it is invested in the market in equities, market funds, bonds, etc. The main advantage of ULIPs is complete transparency.

    Canara HSBC Oriental Bank Of Commerce Life Insurance offers ULIPs that are designed to suit different financial goals. They have plans in which you can modify the sum assured during the policy term.

What must you keep in mind while taking a Life Insurance Policy?

  • Investment

    A life insurance policy must be an important part of your investment portfolio. If you do not prefer investing your money in high-risk schemes or options, a life insurance policy is the best option for you. It helps you invest in a lump sum or as regular payments to save a significant amount of money and earn maturity benefits.

  • Earlier The Better

    It is wise enough to buy a life insurance policy as early as you can. As your age increases, the premium amount also increases. Also, if you develop any diseases or health conditions, it is tougher to get a policy.

  • Do not lie

    Your entire life insurance policy claim can be rejected if the company comes to know that you have hidden any facts. Imagine what a huge blow it will be for your family! They will not be able to make a claim when they need financial help the most.

    If you have any medical conditions or smoke, or an alcoholic, make sure you tell your insurance company about it. Although you might have to pay a higher premium, it will provide you with good financial coverage considering your smoking and alcoholic status. Always disclose all information while taking a life insurance policy.

    Many insurance companies like Canara HSBC Oriental Bank Of Commerce Life Insurance have provisions in their life insurance policies to accommodate smokers and people who consume alcohol regularly.

  • Don’t rely on the employer’s insurance alone

    Many employers take life insurance policies for their employees. However, it is advisable not to rely only on those policies. It is always better to have insurance policies taken separately for yourself. If you quit or get laid off or the company you work for goes bankrupt suddenly, you will be left with no insurance policy for your needs. Having your insurance policy ensures that it will stay with you irrespective of whether you switch jobs or quit working.

  • Life insurance riders

    Insurance companies provide additional benefits such as critical illness benefits, death by accident, income benefit, partial or permanent disability benefit, etc. These perks can give you additional coverage over and above your policy. Don’t forget to discuss this with your insurance advisor so that you get maximum benefits!

  • Understand all policy documents

    When you buy a life insurance policy, spend some time reading through the policy documents carefully. This will help you understand what you are covered for and what is not covered in your policy. If you have any questions, speak to your insurance advisor.

  • Informing your family that you bought a life insurance plan

    One of the most difficult conversations to have with your family is telling them you have bought a term life insurance policy. However, they must know about it so that they are prepared in case of any emergencies. Ensure you keep the policy papers and details in a safe location and let your family members know about it. This will save time and effort when needed.

  • Consider your retirement goals

    A retirement plan is on everyone’s bucket list. It is the best chance to spend time with loved ones when you are free from any worry of work, business, and other matters. A life insurance plan ensures that you have a steady income source even after you are not working anymore. It helps you enjoy special moments with family and loved ones. Make sure your life insurance policy considers retirement goals too!

  • Don’t forget to pay premiums

    This one is a no-brainer! Ensure setting reminders and pay your insurance policy premiums on time. Most insurance companies will send you reminders by email or call when the due date for your premium is near. If you miss paying premiums, your insurance company may cancel your life insurance policy.

  • A lapsed policy can be revived

    If a policy gets lapsed, you need not get disappointed. It is possible to revive a lapsed insurance policy. However, this depends on the policy type, insurance policy provider, and the terms and conditions mentioned agreed upon. You will be required to pay the missed premium and interest amount to revive the policy. Speak to your insurance company regarding this, and they will facilitate the process.

To sum it up

Getting a life insurance policy is the most important decision you will take for your family and dependents. Do your research and read up about the benefits of various policies available. Speak to people who have already availed of life insurance policies. Write down all your queries and get them clarified with your insurance advisor.

Canara HSBC Oriental Bank Of Commerce Life Insurance is one of the most reliable insurance companies in this industry. They have a strong presence in the market and are a trustworthy brand. They can customize your insurance plans as per your needs and financial requirements. Contact them today to speak to their insurance experts.

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Frequently Asked Questions (FAQs) for Life Insurance

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age:It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chances of contracting diseases is low. Young people also opt for policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender:The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits:The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term:Policy terms are also taken into consideration by insurers while deciding the premium amount. Policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation:The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physicianâ s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence. There are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: An insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the policy, the insurance companies generally pay 80% of the total premiums paid.

Buying life insurance online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. Online insurance policies also offer higher benefits. Customers should, however, buy online policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one policy to increase the cover or avoid claim rejection. In case of multiple policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In the case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy life insurance, the insurance company asks for the nominee details. Only the person named as the nominee in the policy can cash out a life insurance policy in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in the case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term. The family receives the death benefit. In the case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment options are chosen the policy works as a source of regular income.

It is a popular misconception that life insurance is only for accidental deaths. A term life insurance plan like iSelect also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy life insurance in your early 20s because it’s is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy life insurance at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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