What is Life Insurance? What are its Coverages?

Introduction

Life is filled with uncertainties. For citing a recent example, the outbreak of Covid-19 has led to the demise of millions across the globe. Life Insurance aims to provide monetary relief to the nominee owing to the premature death of an individual.

Get the basics right

It is essential that you fully understand the basics of life insurance coverage. To answer what is Life Insurance, you must know that Life Insurance is a contract between the insurance provider and you. This contract has specific duties assigned to both you and your insurance provider. The former needs to pay timely premiums, and the latter offers promised monetary compensation if the insured passes away while the policy remains in force.

The proceeds of Life Insurance are paid out to the nominee that you chose to name in your policy. This is of utmost importance, and you must take adequate care in naming your Life Insurance nominee as they will be the beneficiary of the compensation received upon your death.

Claiming Process

The claim process in Life Insurance is effortless. There are three steps involved:

Informing:

The nominee should inform the insurance company. This notifies the insurance provider that they need to settle the compensation applicable to the specific policyholder.

Filing forms:

The nominee then should fill out certain forms that are routine during the claim process. It is an important step and needs the nominee to provide details and supporting documents such as the policyholder's death certificate. Any discrepancy in this step leads to outright rejection of the claim.

Receiving proceeds:

Once the insurance company does its due diligence and is satisfied with the claim, the specified policy sum insured benefit gets paid out to the nominee.

About the Coverage

What is Life Insurance coverage? You sign up for your nominee to receive the sum assured amount through the Life Insurance policy if you prematurely leave this world. This coverage amount depends on the following three factors regarding your life:

• Your income
• Your age
• Your health history

You receive a broad range of sum assured amount that you can potentially apply for based on these. While you may think that it is best to apply for the highest possible coverage, you must remember this entails a higher premium cost. Hence, maintain a healthy balance between the coverage amount and premium costs.

Besides, for availing of the coverage adequately, the policyholder must pay the corresponding premium amount timely. The frequency of this premium payment gets decided mutually between you and the insurance provider. It can be quarterly, annually, monthly etc.

Type of insurance policies

While there are very many types of Life Insurance policies, there are two broad categories of Life Insurance that are as follows:

Pure Protection:

This refers to basic Life Insurance that only aims to offer pure protection by providing monetary compensation in the unfortunate event of the policyholder's premature death.

Protection Plus Savings:

This refers to a sophisticated, advanced Life Insurance product that offers dual benefits. Along with the protection provision through which you get monetary benefits upon your untimely demise, the savings portion of the policy helps you plan for a long-term goal like home purchase, funding your child's education, etc.

Conclusions

Buying a Life Insurance policy is a sound investment. But before you pick from the options available, ensure that you do thorough research and make comparisons between different insurance providers.

Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. I-Sec acts as a Composite Corporate agent having registration number –CA0113. Please note, Insurance related services are not Exchange traded products and I-Sec is acting as a corporate agent to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing.