Why Life insurance as a product is something everyone should have

When I ask you whether you would like to buy a life insurance policy, what would be your intended response? I guess the most likely answer would be ‘No’. Why? Is it because of the premium outgo? The answer to this question would undoubtedly be ‘Yes’.

India is a large country. In fact, its population is second highest in the whole world. Yet, when we look at the penetration of life insurance in our country, the figure is dismal. Let’s see what the numbers say:

The penetration of insurance in rest of the world is far more than that of in India and that too after being such a populated country.

What do you think is the reason of such low penetration? It is a lot of factors actually. Let’s see what they are:

• Lack of awareness – The most common reason which acts as a blockade to insurance penetration is awareness or the lack of knowledge thereof. We in India are not fully aware about the importance of life insurance. We feel, life insurance simply means paying a specified amount of money as a premium every year for promise of a lump sum benefit paid after a long period of time. Since an insurance plan is intangible (you cannot touch or feel it physically), people miss its importance. They believe insurance to be an expense and thus shy away from it.
• Lack of funds – If lack of life Insurance awareness can be tackled, another most important factor to deal with is its affordability. In a country where a majority of individuals are poor, buying an insurance policy often takes a back seat. Meeting the livelihood expenses is more important and as such, insurance is given a miss.
• Ignorance – But what about millions of other individuals who have the required funds, financially literate and are even aware but still don’t have life insurance? The reason is simply ignorance - These individuals believe only in wealth creation and channel most of their savings into other investment avenues like stocks and shares, mutual funds, fixed deposits etc. Life insurance, as such, is given a miss.
• Importance of Financial Planning – Unlike developed countries, financial planning in India is still at its nascent stage. While the educated mass in India is investing in property, mutual fund, gold and stocks, but they do it out of impulse or because somebody else has suggested it. Investments are done without any financial plan or keeping future goals in mind. And thus, the safety security of the family in absence of the bread earner is often ignored. Life Insurance, which can take care of this issue, is therefore ignored. 

Whatever be the reason the fact remains the same. Insurance, as a product, is not seen and understood to be the most important. Most of us therefore ignore the product which has lead to the dismal penetration rates.

What about you? Which reason keeps you from buying a life insurance plan? Is it lack of awareness, affordability, simply ignorance or lack of financial planning awareness? Whatever it is, here is an eye opener for you. Here are some reasons why insurance as a product is something you should have. So let us have a look at them:

Life insurance is most essential for building an emergency fund

Creating a fund which would provide the required finances in an emergency is always advised. If you have set aside funds for those rainy days, you wouldn’t face any financial crisis. When it comes to building such an emergency fund, which instrument lets us do that - Is it the various investment options or an insurance plan? An insurance plan, obviously! Other investment options are purely meant for wealth creation or appreciation. If the sole bread earner meets sudden death, his or her investments would be worth only that much which he or she had invested.

Life insurance, on the other hand, promises a much higher benefit in case of a sudden death. This benefit is irrespective of the amount of premiums you paid under the plan. Take the example of a term plan for instance – Suppose, the Sum Assured opted by you is ` 50 Lakhs and you are paying annual premium of ` 8,000. Your age and chosen plan tenure are also assumed to be 30 years each. In case of your sudden death, say 10 years after buying the plan, your nominee stands to receive Rs. 50 Lakhs. How much was your investment into the plan? Only ` 80,000 (` 8,000 annual premium x 10 years), isn’t it? Had you invested ` 8,000 every year even in the best investment avenue offering the highest returns, would the corpus amount be Rs. 50 Lakhs? The answer is ‘NO’. This is the beauty of a life insurance plan. It helps in creating an emergency fund which comes to your family’s rescue when you are not around.  

Life insurance helps in meeting various life goal

Besides providing emergency funding, life insurance also helps in meeting various life goals which you have. Here is a list of some major life goals of every individual and how life insurance helps in fulfilling these:

• Emergency Fund – Funding for emergencies is the primary goal of every individual and as discussed above, life insurance helps in meeting this goal. Term insurance plans are designed in such a manner that they meet this specific goal. They allow high levels of coverage at very affordable premium rates. Moreover, these plans have a long tenure for a longer protection period.
• Children’s future – When we settle down and have kids, we want to secure their future. That is why we make investments with a long-term perspective which would mature when our children would require them. But what if death hampers this plan? When we are not around who would provide for education of our children? A child plan helps in this regard. Child plans promise to pay a lump sum immediately after the parent dies. The plan continues and the subsequent premiums are paid by the life insurance company. When the plan completes its intended tenure the promised benefits are paid again. Thus, these plans ensure that the dream which you had for your child would not be ruined because of your death. These plans, thus, secure your child’s future.
• Wealth creation – If investment is on your mind, life insurance has a solution for you. Unit Linked Insurance Plans are specially designed life insurance plans. They offer the dual benefit - insurance protection as well as investment returns. These plans are like mutual fund schemes where the premium collected is invested in a diversified market portfolio or a portfolio of assets you choose. Since the portfolio reflects the market movements, the returns are market-linked and attractive.
• Retirement Planning – You wouldn’t like to forget your golden years of retirement, would you? Planning for a comfortable retirement is essential where we wouldn’t have to worry about our finances. That is why we invest for our retirement. Life insurance pension plans help us plan our retirement too. These plans earmark a financial plan for our retirement and pay pensions throughout our lifetime.

Isn’t life insurance all-inclusive? Whatever be the reason of your investment, life insurance has a solution for every need. 

Life insurance saves tax

The final benefit which a life insurance plan provides is tax exemptions. Whatever you invest and whatever you get back, both are tax free. Whether you buy a term plan, child plan, Unit Linked Insurance Plan or Pension plan, premiums paid are exempted from tax up to a limit of ` 1.50 Lakhs under Section 80C of The Income Tax Act 1961. Similarly, the plan benefits received on maturity or on death are also tax free under Section 10(10D) of The Income Tax Act 1961.

Life insurance is not a concept or an idea. It is a product, though intangible, which every one of us should have. Whatever be our requirements and whatever life stage we are in, a life insurance product finds its application. While a term insurance plan is useful in each life stage, other plans depend on your requirements. For instance, when you are young and want to invest, ULIPs could be your answer, whereas a child plan makes sense for a parent. Individuals in their middle ages should plan for their retirement. So, a different life stage has a different life insurance requirement. But the bottom line doesn’t change - Life insurance is essential. Before you buy a life insurance plan though, do your homework. Know some important aspects which should factor in your purchase decision. These aspects include:

• The coverage – Ensure an optimal coverage. When buying a term plan, choose coverage as per your Human Life Value or any other calculations which would ensure a sufficient corpus to meet your family’s financial requirements in your absence. Since premiums are cheap, a high cover should be availed. When buying a child plan, take a cover which would be sufficient for funding your child’s future planning. Similarly, pension plans should be bought keeping in mind the pension which would be sufficient to meet your expenses post retirement. So, avail of a suitable coverage when buying any life insurance plan.
• The term – The term of the policy should also be chosen to coincide with your requirements. Term plans should ideally have the highest tenure while child plans and pension plans should have a term completing at that time when the funds would be required. In case of ULIPs, the term should depend on your investment horizon.
• The premiums – While premiums are essential in determining affordability, they should be compared against the coverage available. The best plan should have the highest coverage at the most reasonable premium. Compare the different plans for their premium rates and coverage feature before you settle on one.

Life insurance is a very potent product if it is properly utilized. Term plans are the best and the most important life insurance plans which should never be given a miss. Other plans depend on your requirements. Assess your requirements and add one or more life insurance product in your financial portfolio today. And yes, bury your ignorance or lack of knowledge. Life insurance is important and you should opt for a plan in your best interest.

answer to this question would undoubtedly be

Donating Life Insurance: A Tax-Free Act of Charity

Ratan Tata needs no introduction. He has always used most of the wealth created by his firms for charitable purposes, from education to medical and rural development.

With 65% ownership of TATA Sons being held by various charitable organizations, Ratan Tata might not be a billionaire on paper but in reality, he is the richest person in the world, with his worth in reality being more than that of Bill Gates and Warren Buffet. He has created unmatched goodwill with his philanthropic deeds.

If you don’t have large amounts of money but philanthropy is one of your goals, donating your life insurance policy to charity can be a powerful strategy. When you buy life insurance online, you can get higher coverage for lower premiums, which in turn would allow you to make larger gifts than you might be able to otherwise afford, while also gaining from tax benefits.

Charitable Donation of Life Insurance: How it Works

If the thought of charity crosses your mind, buy a life insurance policy online. All you need to do is list the charity as the named beneficiary. It becomes a win-win situation for both you and the organization, since both can gain certain benefits. Of course, you will need to pay the premium on the policy as you normally would. So, what you are effectively doing is choosing an affordable amount that you can pay annually towards charity in the form of premium payments, although the charitable donation will occur only when the policy can be claimed.

After your demise, any proceeds from the policy will be contributed to the charity as a charitable gift. The reason is that life insurance death benefits that are paid to charities are not subject to taxation, hence the charity will be able to obtain the full sum assured, without worrying about paying taxes.

Benefits for You & the Charity

• The premium payments are deductible from your annual tax return, also known as itemized deduction.
• The charity fund will not be included in the overall value of your taxable estate, reducing the liability of your potential estate tax.
• In case you have a policy that pays dividends, you can assign those policy dividends instead to be paid to the charity.

A good option is to buy a life insurance policy online, since it is simple and easy, and then to transfer ownership. In return, the charity will then issue a receipt for that gift. Also, the charity that you are choosing must be a qualified 501(c)3 organization, which means that the entity must meet the IRS’s definition of a nonprofit organization.

Parenting Is a High Responsibility Job

Parenting is one of the most taxing, high responsibility but fulfilling jobs that one can have. Raising children does not only mean giving them proper food, good clothes or sending them to school, it also includes teaching them the right things so that they grow up to be good human beings, with a secure future. This can be achieved by saving for their future needs, investing in schemes like child insurance plans and teaching children the habit of saving a specific proportion of whatever money they have.

Fostering Social and Emotional Development

Parenting is not only about fulfilling the basic physical and financial needs of children, but is also about fostering the emotional, social and intellectual development of the child. This requires a lot of patience and understanding. While all parents love their kids, expressing it in the right manner is a very important component of good parenting. An effective parent is one who makes his/her child feel loved and cherished. This is possible by spending time with your child in doing what he/she wants to do and expressing your love. Loving, however, does not mean that you ignore their mistakes. Do correct them but try to avoid blaming and criticizing them or labeling them for it. Instead point out where they are going wrong and how they can correct it.

Parents need to be effective teachers and they can become so by following the same rules and habits that they wish to develop in their children. One should remember to be flexible and ready to modify the rules as the child grows or the situation changes. Inculcating the right values and trusting your children will go a long way in ensuring that your child grows up to be a good human being.

Providing Financial Security

Every parent wishes to provide the best of facilities for their children and is even ready to work extra for that. However, parents also need to think about the future financial needs of their kids and thus make the right investment decisions. These include investment in child insurance plans, opening recurring and savings deposit accounts or investing in bonds or other investment vehicles.

Right and timely investments will ensure that your children are financially secure in case of any eventuality. Buying the best child plan will ensure that the funding needs during a child’s growing years are not compromised due to any reason. It is advisable to make a correct assessment of your child’s future financial needs, after taking into account the impact of inflation and then choosing an investment option that offers the desired returns at the right time.

Last, but not the least, is to inculcate in your children the habit of saving a small portion of their funds from a young age itself. This will ensure that they remain disciplined even when they grow up. You have done your bit if you have made the right investments in banks and child plans, besides teaching your children the advantages of saving.

The no-hassle cashless insurance policy – and why you need it

Cashless health plans are a blessing when you need hospitalisation urgently. Let’s take a look at how they work.

The biggest fear for any person today is to suddenly fall ill and require hospitalisation. Medical treatment costs are quite prohibitive in India, and they continue to rise every year. Also, many hospitals force patients to first pay admittance fees before starting treatment – if you are short of money at that time, this can result in loss of valuable time for you or your loved one.

Health insurance companies realise the gravity of a patient losing precious minutes of treatment. Hence, they have devised the cashless health insurance plan, which is a wonderful solution for policy holders: they can get admittance at once after giving the policy details to the hospital, and the patient starts receiving treatment. The bills are settled by the insurance provider directly with the hospital.

How the cashless health plan works

Cashless health insurance makes access to quality treatment possible in the shortest span of time. On requirement, the policy holder makes their way to the nearest network hospital (the insurer has tie-ups with hospitals in every city) and submits the policy details. On confirming the details, the hospital admits the patient and fills out a form for the Third Party Administrator (TPA). The TPA then checks the policy terms and communicates whether the cashless claim may be entertained or not. The TPA may also set an upper limit on expenses to be borne by the hospital – the difference must be paid by the policy holder.

The benefits of the cashless health insurance policy

The best cashless policies today provide the following benefits, among many others:

• No medical test is required for enrollment, and you can get a sum assured of up to Rs 5 lakh
• There are no sub limits on hospitalisation coverage
• Charges are paid for room hire, ICU, day care procedures, domiciliary treatment, organ donor expenses
• Premiums on the policy are liable for tax benefits under Sec 80D
• Possibility to increase sum assured while renewing the plan

In addition, a policy holder may even time a surgical procedure for themselves or a loved one basis their own convenience, and if the procedure is entailed in the policy terms. Thus, cashless health insurance is the best answer to both emergency and timed medical calamities, and it helps policy holders save a lot of money while providing immediate treatment.

AVIVA's all new health care programme: The eligibility criteria you must know

AVIVA’s insurance plans take health insurance to the next level with superior products and easy eligibility criteria.

In times of rising inflation and high living costs, people are under tremendous pressure to create wealth for themselves and their loved ones. Single income families, especially, find the going very tough every month. Many people try to make an additional income by getting freelance work or getting part time assignments over the weekend.

But overwork and constant deadlines can take a toll on one’s health. Stress, anxiety, pollution, lack of exercise, consuming junk food, erratic sleeping hours, etc. contribute to ill health. Soon, one may be diagnosed with a critical illness that takes a lot of money out of their precious savings. Hence, it is prudent to take health insurance to save the high future cost of treatment, especially when dealing with critical illnesses.

Health insurance provides coverage against the risk of spending a lot of money for emergency medical procedures and diagnosis. Currently, the medical treatment and hospitalisation costs in India are quite prohibitive – thus, a reliable health plan such as those provided by AVIVA Health Secure range of health care can help pay medical bills and diagnostic charges. The policy pay-out is paid as a lump sum once the critical illness diagnosis is confirmed. Thus, the policy holder can start treatment at once, and also consult with the best specialists.

Thus, AVIVA health insurance provides the best ever solution to help you get timely access to good medical care. Consider the following eligibility criteria for AVIVA’s health care programme:

• Entry age for the policy: 18 years minimum and 55 years maximum
• Maturity age: 65 years
• Premium payment frequency: Half-yearly or yearly
• Tenures: Minimum 10 years and maximum 30 years
• Sum assured: Rs 5,00,000 minimum and Rs 50,00,000 maximum. This includes the critical illness cover that you take under another policy.
• Rebates: The policy gives you a tax rebate if you have a sum assured of Rs 10 lakh or more. 

* Refer to the premium quotation to calculate the instalment premium.

Thus, taking the AVIVA healthcare plan helps to pay the high costs of treating a critical illness – thus protecting your savings for other purposes.