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What is Life Insurance?


Availing a life insurance policy can be one of the best financial decisions a person takes. Read this article to find out everything there to life insurance – its features, benefits, claim settlement process, etc.


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Life Insurance is a much straightforward concept – you basically buy a policy that offers your beneficiary or beneficiary's compensation when you are no more. You need to have thorough knowledge about life insurance to be able to take a well-informed decision about the type of life insurance policy that will be best suited for your unique needs, the amount of death benefit that you should opt for, etc. Since human life is very precious, you get financially as well as emotionally disturbed when you lose a family member. In such challenging circumstances, life insurance policies offer the much-needed financial peace to your family in your absence.
It provides them a lump sum or pay outs in installments, as mutually decided between you and your insurance company at the time of signing the policy. This ensures your family a reliable and stable source of income for meeting basic needs like child’s education, daily expenses, unpaid bank loans or debts (if any), etc.

Things You Must Know About Life Insurance Plans

Types of Life Insurance Plans

Comparison of Different Life Insurance Policies

OverviewPure risk protection plansInsurance plus savings plan that provides a lifetime coverageInsurance plus savings plan - may or may not be participatoryInsurance cum savings plan, offering guaranteed money back during the policy periodInsurance cum investment plans that are participatory in natureTraditional plans that are non-participatory in nature
TermUsually ranges from 5 years to 40 years or moreWhole life or until the age of 99/100 yearsUsually ranges from 10 years to 40 yearsTypically 20 years or 25 yearsUsually ranges from 10 years to 30 years or moreTypically till the annuity is alive i.e. no fixed period
Maturity BenefitsNot payablePayablePayablePayablePayablePayable
Death BenefitsPayablePayablePayablePayablePayablePayable

Exclusions in a Life Insurance Plan

A life insurance policy is an agreement between the insurer and the insured. The insurer would pay the sum assured when the insured pays the premium regularly. This would, however, happen only during the occurrence of an insured event. However, not all situations are covered in a life insurance plan. The life insurance company would investigate in case of an unnatural death of a policyholder. The sum assured is not paid if a death occurs due to any of the below reasons:
  • Consumption of drugs, alcohol or any intoxicated stuff
  • Participation in any dangerous activity
  • Participation in a criminal act
  • Due to war
  • Due to pre-existing diseases
  • Due to pregnancy or childbirth
  • Due to self-inflicted injuries or suicide
  • Excessive smoking leading to lifestyle diseases

Types of Popular Life Insurance Riders in India

Life insurance companies offer additional riders to supplement your insurance plan. These offers benefits over and above the life covers included in your policy. Opt for riders only if it suits your unique requirements. It is neither wise to be under-insured, nor to be over-insured. Here are some of the useful riders that you may consider while buying a life insurance policy:
  • Critical Illness: This add-on rider covers illnesses that are usually not covered in life insurance plans. These offer covers on medical expenditures related to illnesses such as cancer, heart attack, stroke, paralysis, kidney failure, etc. The treatment for such illnesses not only burns a hole in our pockets, but is a cause of emotional turmoil as well. Therefore, being financially prepared for such exigencies is a wise move. Besides, it saves us from emotional stress to a great extent. The lump sum can be availed on the policyholder being diagnosed of any of these illnesses.
  • Accidental Death An Accidental Death rider keeps the policyholder’s family financially covered in case of his/her death. The additional lump sum offered to the beneficiary by such riders enables the family to meet long and short-term financial objectives like immediate family expenditures, outstanding debts of the policyholder (if any), child’s education and marriage, etc. Apart from being a stable source of income, it acts as an emotional support and saves the family from an impending debt burden. Income Benefit Rider This rider assures the policyholder’s family of a reliable and steady source of income after his/her unforeseen death. This rider proves to be especially beneficial when the policyholder is the sole breadwinner of the family. This rider relieves the family from financial stress and instability, securing their lives.
  • Waiver of Premium: In situations when the policyholder is unable to pay premiums due to disability or death of the policyholder where the insured and policyholder are different, this rider prevents the life insurance policy from lapsing and ensures that the policyholder can avail the pre-decided maturity benefits.
  • Partial and Permanent Disability: There is no guarantee to the kind of surprises that life throws on us, and surprises are not always good. Hence, it is best to be prepared for different eventualities, if it may arise. A partial or permanent disability rider serves as a much-needed financial support for the policyholder and his/her family when there is lack of a steady source of income due to the disability. Insurance companies usually offer 10% of total sum assured on such riders. Since riders offer the aforementioned benefits, it is recommended that you purchase them if they meet your requirements. However, it is essential to do your research and make sure that you do not make any unnecessary purchases as you may end up spending money for something that you may never even use. Go through each of the riders and purchase them only if they provide the benefits that you will actually require at some point in time.

How is your Life Insurance Premium Calculated?

Here are the factors to help you understand how your life insurance premium will be calculated:
  • Age: Your premiums would be lower if you buy a life insurance plan at a younger age. With your increasing age, your insurer’s level of risk will also increase. Hence, insurance companies will up their premium amount. So, don’t wait till you grey, apply today!
  • Gender: Research says that women generally live longer than men. This means life insurance companies interpret men as riskier applicants than women. Therefore, their premiums too are slightly lower than that of men. So, your life insurance premium does depend on your gender too!
  • Lifestyle habits: Insurance companies usually calculate premiums based on risk factors like your smoking, intake of drugs and alcohol drinking habit. These habits enhance the chances of lifestyle diseases, making insurance companies charge a higher premium from you. Insurers usually double the premium amount for smokers as compared to what they do from non-smokers.
  • Duration of coverage: The longer the duration of your coverage, the greater is the risk undertaken by the insurance company. Short-term life insurance plans have lower premiums than long-term life insurance plans. Though, short term life insurance policies have lower premium than long term life insurance policies, the coverage/ policy term offered is also lower. Plan for a cover that protects you for a longer duration.
  • Existing health condition: Most insurance companies makes it mandatory for applicants to submit their health records, which is thoroughly checked for signs of chronic illnesses or potential health problems that might make them high-risk customers. Applicants with clean health records are eligible for availing lower premium rates than those with records of health issues or have symptoms indicating at the same.
  • Medical history: The medical history of an applicant is one of the parameters that decide the premium amounts they will be eligible for. The lack of medical history of life-threatening diseases like cancer improves their chances of having to pay a comparatively lower premium than those with medical records that indicate at a high scope of them contracting the hereditary health conditions.
  • Obesity: Obesity is the root cause of various medical conditions like blood pressure, coronary heart diseases, stroke, osteoarthritis, cancer, etc. that can lead to further complications. Hence, applicants who are obese are charged higher premium because they are viewed as potentially high-risk customers.
  • Participation in adventure sports: Participation in activities that cause an adrenaline rush like mountain climbing, trekking, driving fast cars, bungie jumping, scuba diving, etc. involve high risks. Therefore, insurance companies charge a higher premium from adventure sports enthusiasts than those who do not enjoy such activities.
  • Profession: Applicants working in industries like mining, oil and gas, fisheries, etc., are at a higher risk of fatal medical and health conditions. Covering such applicants through a health insurance policy also involves high risk for insurance companies. This explains the reason why such applicants are offered higher premiums than those who are employed in fields that are perceived to be safer like finance, marketing, etc.

Life Insurance Online Payment

Most life insurance companies have embraced digitalization for the convenience of their customers, contributing to customer delight. These payments can be done through the following ways: The available online payment platforms are net banking, debit/credit card, mobile banking, etc. You can also opt for the auto-debit option by giving your bank the mandate to deduct the pre-determined premium amount from your account on specific dates, as per your policy terms - quarterly, half-yearly, monthly, or annually. The payment deduction can be done through, Electronic Clearing Service (ECS), NEFT, Standing Instructions (SI) mandate, eCMS, auto-debit facility, etc., as per your preference. However, these online payments options may vary among life insurance companies. These online payments can be completed by logging into the official website of your life insurance company or through the internet banking platform of your bank.

Life Insurance Offline Payment

For policyholders who prefer making their premium payments offline, it can be done in the form of cash or cheque. Cheques can be deposited by visiting any branch of the insurance company, while cash payments can be done through bank transfers in the name of the relevant life insurance company.

Impact of GST on Life Insurance Plans

The implementation of GST (Goods and Services Tax) has had an impact on life insurance plans as the premium payments are not exempted for it. Services Accounting Code (SAC) is applicable on life insurance premium payments. The SAC for GST classification for services related to life insurance policies, excluding reinsurance services, is GST Code for Life Insurance. For pension services, the applicable SAC GST code is 997131.

Life Insurance Claim Process

Death Claim
In the event of your unfortunate death during the policy term (the policy is yet to mature), your beneficiary/beneficiaries can claim for your life insurance policy. This claim can either be a ‘death claim’ or a ‘life insurance claim’. During a death claim, your beneficiary or a family member should intimate the claim by calling Coverfox.com. There can be an early death or death due to aging. It is completely based on the time since the policy was bought. An early death is when you die within three years from the policy commencement date. Your beneficiary/beneficiaries will have to approach Coverfox.com or the insurance company and fill the claim intimation form. The below documents would be required:
  • Completely filled claim form
  • Death certificate
  • Identity proof of beneficiary/beneficiaries
  • Age proof of the policyholder
  • Life insurance policy details
  • Assignment deeds
  • Legal evidence of title in case the policy is not nominated
  • Medical reports and doctor’s certificate
  • Post-mortem report
  • Police inquiry report

Document Checklist - Life Insurance Claim Process

Natural Death: The below documents need to be presented during a natural death claim:
  • Completely filled in Claim settlement form
  • Original death certificate issued by the local authority
  • Copy of medical reports, death certificate, and admission notes, test results, discharge summary, etc.
  • Policyholders age and identity proof
  • Age and identity proof of beneficiary/beneficiaries
  • Proof of the bank account of beneficiary/beneficiaries
  • Proof of the policyholder’s current address
Accidental or Unnatural Death (Including Suicide): The beneficiary or a relative of the policyholder should intimate the claim by calling Coverfox.com or the insurance company. The below mentioned documents need to be presented for a hassle-free claim settlement process:c
  • Completely filled Accidental Death benefit form
  • Death certificate
  • Police FIR copy
  • Medical or the doctors report confirming the cause of death
  • A statement mentioning the date, location and situation of the accident had occurred
  • Proof of Identity and relationship that the beneficiary/beneficiaries share with the policyholder
Accidental Disability and Dismemberment Claim: The below documentation needs to be presented for processing the claim:
  • Original policy copy
  • Medical records like investigation reports, discharge summary, etc.
  • Policyholders age proof and identity proof
  • Photo and identity proof of the beneficiary/beneficiaries
  • Bank account details of beneficiary/beneficiaries
  • Address proof of the policy holder
Critical Illness: The below documentation needs to be presented for processing the claim:
  • Original policy copy
  • Medical records like investigation reports, discharge summary, etc.
  • Policyholders age proof and identity proof
  • Photo and identity proof of the beneficiary/beneficiaries
  • Bank account details of the beneficiary/beneficiaries
  • Address proof of the policyholder
Terminal Illness: The below documentation needs to be presented for processing the claim:
  • Original policy copy
  • Medical records like investigation reports, discharge summary, etc.
  • Policyholders age proof and identity proof
  • Claimants photo and identity proof
  • Bank account details of the claimant
  • Address proof of the policy holder
Waiver of Premium: The below documentation needs to be presented for processing the claim:
  • Original policy copy
  • Medical records like investigation reports, discharge summary, etc.
  • Policyholders age proof and identity proof
  • Claimants photo and identity proof
  • Bank account details of the claimant
  • Address proof of the policy holder
The insurance company would investigate the genuineness of the claim and respond about the settlement accordingly. In case of incomplete documentation, the insurance company would raise a requirement and inform the insured's nominee.

How Much Life Insurance Cover Do You Need?

There are many benefits of buying life insurance. However, the main objective of a life insurance plan is to provide life cover to the assured. The sum assured is the financial compensation in case of the untimely demise of the insured during the policy tenure. Hence, it is important to decide the right life insurance cover while buying a life insurance policy.
How much life insurance cover do you need depends on:
  • How many family members are financially dependent on you?
  • How much is their financial dependency?
  • At what age will you retire?
  • Is your spouse working? If yes, you can plan the premium amount based on the ratio of contribution to the family’s income.
  • How much will your children’s education cost?
  • Do you have any loan to be paid-off? You are likely to consider the loan amount as your life insurance cover. Because you do not want your family to suffer or undergo hardships to repay debts against your name, in case of unfortunate eventuality.
  • What are your retirement goals? How much money would you require once you retire?
For children’s education, you can plan separately with the help of a child plan. To plan your retirement, you can invest in a retirement plan.
If you are planning to buy a pure life insurance cover – a term plan is highly recommended. Opt for a life insurance cover that is 8 to 10 times of your annual income.
For example, if annual income is Rs.5 lakh, the life insurance cover (sum assured) should be approximately Rs.40 lakh. Regardless of the life insurance plan you purchase, you must check the claim settlement ratio of each life insurance company to assess the reliability and efficiency of their services.

How to Choose the Best Life Insurance Plan?

There are many life insurance companies in India, and each company offers wide range of life insurance plans designed for varied needs of their customers. Therefore, you should know the factors you need to consider while buying a life insurance policy that is best suited for you.

Consider the Following before Buying a Life Insurance Policy

Buying a life insurance policy is not really a big deal. But no one wants to unnecessarily pay a bomb for the type of policy they want to buy or purchase a policy that is actually not as per their requirement. Therefore, you should know what you are investing in to be able to make a conscious decision about the life insurance you should opt for.
  • Review the policy Analyze and evaluate your life insurance requirements and review your policy at regular intervals. Certain changes like marriage, an addition of a family member, job change, etc. calls out for a necessity to re-evaluate your insurance needs.
  • Analyze your coverage The amount of income you offer to your family members who are dependent on you, your loans and financial expenses would help you analyse the coverage you should opt for on your policy. This will enable you to efficiently secure your family financially in your absence.
  • Ensure your premium payment capacity Ensure you have capacity to pay the premiums. If the policy lapses due to non-payment, it will not only adversely affect your future financial goals, it will also dent your savings. Therefore, it is essential that you review the amount of premium you will be able to pay and decide on the life insurance policy accordingly.
  • Compare quotes from different insurers Before finalizing on a particular insurance policy, ensure that you compare the life insurance plans of different insurers. This would give you the scope to narrow down your search as per your requirement post comparing the quotes, features, benefits etc. of different insurers. It is a known fact that online life insurance policies are cheaper than the offline ones. Therefore, it is highly recommended that you buy online life insurance plans.
  • Read your policy document carefully Reading your policy document is very important. There are certain exclusions to life insurance policy covers that you should be aware of, so that you can prevent misunderstandings and claim rejections later. Hence, knowing what is not covered is equally important to know along with knowing what is covered!
  • Do not jump for riders unnecessary If you increase the coverage offered under your basic life insurance policy, you may consider buying riders that would fulfil more requirements such as health etc. However, select the riders wisely. Opt for only those that are aligned to your unique objectives. Do not jump for them, if they are not required.

Comparing Life Insurance Plans: Things You Need to Know!

It is important to compare life insurance plans online because all life insurance companies offer different life insurance plans. Moreover, each life insurance company offers a number of variants of each type of life insurance. Analyzing the right plan for oneself could seem like a daunting task.
But don't worry!
Coverfox’s tool has transformed such a daunting task into a cake walk.
Online life insurance comparison tool removes all the guess work. Coverfox’s comparison tool helps you find the best life insurance plan, and that too at an affordable premium!
Let's have a look at the factors you should consider while comparing life insurance plans:
  • Life Coverage Premium: First and foremost, ensure you are buying an adequate life cover and are neither over-insured nor under-insured. After you have enlisted some policies, based on their features and benefits, you need to compare the premiums for the same coverage amount offered by each one of them.
  • Features of the Life Insurance Plan: Compare features of different life insurance features offered by various life insurance companies. Always make sure you opt for a comprehensive life insurance policy with customizable policy tenure, sum assured, premium paying mode and frequency, payouts, etc., so that you can design it further to your unique needs.
  • Life Insurance Riders: Riders are add-ons that enhance your basic life insurance coverage. The life insurance riders are optional paid features. However, before buying a life insurance plan online, you should watch out for the riders you want to buy, if they are offered by a different insurer as an in-built feature. Some of the important riders you may wish to add to your policy may be available as a feature of the plan offered by a different life insurance company. However, make sure that you opt for riders only if you genuinely need them as opposed to opting for one and over-insuring your life insurance policy.
  • Claim Settlement Ratio: Claim settlement ratio of the company symbolizes the proportion of the total claims settled against the total number of claims filed. Higher the claim settlement ratio, the better. A higher ratio implies that the chances of your claim getting settled are also greater. For each life insurance company, the claim settlement ratio changes every year. Therefore, it is an important factor while comparing life insurance plans.

Life Insurance Companies’ Claim Settlement Ratio for the financial year 2017 – 2018

LIC98.19%Aegon Religare95.30%
Max Life96.23%Canara HSBC92.99%
Birla Sunlife88.45%Exide Life86.10%
Tata AIA Life94.47%Reliance Life95.01%
Star Union Daichi94.08%Future Generali90.61%
ICICI Prulife96.20%Aviva Life82.00%
PNB MetLife92.90%Bharti AXA Life80.00%
Bajaj Allianz91.30%IDBI Federal Life84.79%
Kotak Mahindra Life90.73%India First Life72.21%
HDFC Std95.02%Shriram Life65.66%
SBI Life95.70%DHFL Pramerica57.19%
Sahara Life89.97%Edelweiss Tokio85.10%

Step-By-Step Process to Buy Life Insurance Plans Online

Individuals can compare and buy life insurance policies through the website of Coverfox in just a few clicks. Here are the steps that one would need to follow to avail a life insurance cover:
  • Step 1 - Go to https://www.coverfox.com/
  • Step 2 - Select Term Life to view term insurance plans or Investment to view other life insurance plans
  • Step 3 - Enter basic details (personal information like age, income, etc.) and financial requirements.
  • Step 4 - On submitting the necessary information, the user will be able to view the plans that fit his or her insurance needs. To buy an insurance policy, one needs to simply click the Buy Now or Invest Now option. This will direct the user to the payment page, where he or she can pay premiums and purchase the policy. The individual can also request a call back by submitting his or her telephone number on the Coverfox.com website and scheduling an appointment with an agent.


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