The video here is demonstrated in Telugu. For non-Telugu speakers, please read the blog for a better understanding.
Click here - to watch on Youtube
Note: The colored texts are links.
Note: I may mention some negative scenarios like death, recession, or health issues. Please do not be offended as these words are used only for better understanding.
Why life insurance is a must for everyone?
Let us understand it with an ideal scenario, Let us take a Guy named Ravi for our story, he is only son in family, they live in a rented house, Ravi is only bread and butter earner in family.
Ravi recently bought a dream house with loan of 60 lakhs from bank and loan of 20 lakhs from his friends, relatives altogether, Total amount - 80 lakhs
lets assume two cases here
case-1
Ravi does not have life insurance and health insurance, he met with an accident, Ravi's family tried saving Ravi life with amount they had, and also took additional loan of 5 lakh to save their son's life, But bad luck, Ravi is no more, Now Family had to repay additional loan of 5 lakh they took and also need to pay 80 lakhs back for the house loan they took, There will be a leisure if they decide to sell the house or properties to the bank, but still there will be a hefty amount left to pay for Family and it will be extremely burdening for his Parents if they are at Old age
case-2
Ravi has life insurance and health insurance, he met with an accident, Ravi's family used health insurance claims to save him, despite giving best try, Ravi is not with us,Now since Ravi had life insurance, his nominee would get 1 crore (assuming he took 1cr cover), with this , His parents can repay the loan amount of bank, and they can keep the remaining money , which can be helpful if parents are at Old age
How do you define Life insurance in simple Terms?
To put it simply, life insurance is an insurance that pays coverage amount on your death. it will be paid to your nominee
You need to pay 1 year of premium amount on time to get eligible for coverage.the fee can be minimum like 800 to 900 INR per month for coverage of 1crore
It is better to take at Young age, to get less Premium amount
Your insurance wont be rejected if you pay your premiums for 3 years
What are types of Life Insurance?
Term Policies: Policy that pays on your death,it is a must have for everyone
Defined Benefit Policies: This policy comes helpful when you have met with personal accident or critical illness which does not allow you to work. Recommended if you are working in Hazardous Environments like chemical factories, construction sites
Endowment Plans: This is a policy which on your death, or pays back once the tenure is done, More like LIC policy, you can avoid as you can keep the amount in equity and earn more than what is offered
Money back Policies: This policy pays you back on regular intervals, you can avoid this as well as you can get from equity
Whole Life Policy: As Human Life expectancy is set to be 100 years in general, You will have cover upto 100 years, if your death has happened after 100 years, it will be passed on to your children, this as well is not recommended
Group life policy: If you are working in an MNC or a well known organisations, you will already be having it, its more like Death during your tenure in company and your nominee gets insurance from company you are working for
Child plans: This is for your childrens life, marriage and education, You can avoid as you get more from equity
Retirement plan: This is more like your pension plan and you can avoid as you can get more.
What are add-ons or Riders for Life Insurance?
Critical illness rider: In case, you had some critical illness and you are not able to work, in this case, you will get money from insurance, This is a must rider to include with insurance you take.
Accidental Death and Disability Benefit: Opt in, if you are working in hazardous environment, else you can ignore it
Wavier of Premium Raider: In case you are not able to work or lost job, you don't need to pay the premiums if you have this rider
Return of Premium Raider: In case , you have survived till your tenure, you will get your amount back, it is not recommended as it only adds up the cost
Limited Pay: You will pay huge amount in short time, as to reduce the premium amount, this is not recommended unless you have unstable income like Seasonal Business
Income Benefit: They will cover your regular income in case you are not able to work, recommended but not mandatory
In what cases does life insurance does not pay Nominee?
- Death by suicide
- Death caused by Drug/ Alcohol
- Adventure life threatening activities like Paragliding, Scuba Diving, Sky Diving...
- Criminal/Unlawful activities
- Private aviation related death, In case you were dead in your own private plane
- Maternity related complications causing death
- Death by pre existing illness
- Incorrect Information like hiding smoking habit - In case you smoke, your premium would be higher than non smokers
- Death due to natural disasters like earthquake, hurricane..etc,.
- If policy holder was murdered by nominee, claim will be rejected
What mandates you need to follow while taking Life insurance?
- You need to disclose your complete health information, it is better to do health check up before taking life insurance
- Keep your family in Loop
- Always consider suitable rider as suggested above
- MWP(check this box), if you selected MWP, Married Woman Property, In case of your death, your wife would get the money first and then goes to the bank, In case you have not checked this, then bank gets money first. One loophole here is in case you had two marriages, you took policy at your first wife,even if you are divorced,Your first wife will get the money.
Understanding Surrender Value and Paid Up value in Insurance!
Surrender Value
- Surrender Value is the amount of money you get if you decide to terminate or cancel your life insurance policy before it matures or before you pass away
- it is like cancelling the policy you paid and getting refund amount you paid till now
- In case, you want to discontinue policy, Opt for surrender value if tenure is 9 to 10 years far away
Paid-Up Value
- Paid-Up Value is when you stop paying further premiums but your policy still continues with a reduced sum assured.
- It’s like saying, "I don't want to pay anymore, but I still want some coverage based on what I’ve already paid.
- In case , you want to discontinue the policy, Opt for paid up, if policy is 2 to 3 years away
Both Paid Up and Surrender Values will be in the document of the Insurance plan that you opted
My best advice is to have coverage of 1cr and tenure of 74 years, You don't need to worry about selecting best one in life Insurance like Health insurance cause as Per law, if you have paid 3 years premiums, your insurance should not be rejected
For more session on Finances - Contents of Blog
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Excellent explanation and it is useful for everyone
ReplyDeleteThanks amigo
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