Abour Life Insurance
		What is life insurance and do I need it?
		Liquidity While most companies allow a loan against such policies, some companies allow withdrawals against the same (although one must clarify such terms and conditions in the policy).
		How much insurance do I need?
		Once you have decided that you need life insurance, you need to determine how much insurance is adequate to secure your risks. An average Indian insures himself for Rs 100,000-200,000. Ask yourself a simple question. If you are the breadwinner in your family (or a significant contributor to household expenditure) then is that (your insurance) amount sufficient to take care of your family's lifetime needs, if you pass away. The answer is probably NO. A general rule of thumb is that you should insure yourself for at least six times your annual income. This amount is normally adequate for your family to sustain themselves at present levels, until they recover from the financial loss caused by your absence. However, if you use only the thumb rule you are not taking into consideration your present economic state - your savings, your contribution to household expenditure, loans and liabilities, and your present insurance cover, if any. As a result, you will not get an accurate picture of what your insurance needs are. If you want to determine how much insurance is adequate for you, use the SBI-Life Insurance Planner. The planner will lead you in an easy step-by-step manner to calculate the expenses you could leave behind and determine what your family will need to cover them.
		How do I understand a life insurance policy?
		It is necessary to know the following terms in order to understand a life insurance policy: Premium - the amount of money you have to pay to continue your insurance coverage. The premium amount depends upon
			Your age
			Policy selected
			Mode of premium payment
			Term of premium payment
			Term of the policy
		You could choose to pay premium monthly (as a deduction from your salary), quarterly, half yearly or annually. However, there are Single premium policies where you pay premium once only (hence you do not have the facility to make the effort of paying premium regularly). Term - the number of years you choose to insure yourself. The longer the term the lower the premium. Policy terms vary from a single year to a maximum of 55 years. Not all policies offer you a range of terms. Premium paying term - the number of years you pay premium on your policy. The longer the premium paying term, the lower the premium. Usually the premium paying term is the same as the policy term. However, some policies offer you the option of selecting a premium paying term that is lower than the policy term. Sum Assured / Face amount - the amount of insurance cover you have or the minimum amount your family receives in the event of your demise. Your family could get more than this amount based on the type of policy or riders that you select. Bonus / Participating profit - is declared by the insurance company each year as a proportion of the sum assured. This amount could vary; it could be different for different policies and terms. Although declared each year, the bonus is a lump sum payment made to the insured person upon maturity or to his family upon death, in addition to the sum assured. Bonus is based on an insurance company's assumptions about the future performance. Like any other assumption, actual results will be more or less favourable. The longer the time being projected, the greater the likelihood of variance from the predicted values. Not all companies guarantee the amount of bonus on each policy. Guaranteed Addition - is a declaration made by the insurance company; it states that irrespective of the financial results of the company, the company will pay the guaranteed amount of money, to the insured or his nominee. Like the bonus amount, this is a lump sum payment made to the insured upon maturity or to his family upon death, in addition to the sum assured. Survival Benefit - is the amount of money received at pre-fixed, regular intervals by the insured person, upon survival of the term of the policy. Often, money received upon maturity or at the end of the term of the policy is also referred to as Survival benefit. Maturity Benefit - is the amount of money received by the insured, upon survival of the term of the policy. In case of policies that offer a bonus, the sum assured plus the bonus for the term of the policy is paid to the insured upon maturity. In addition, some policies offer a loyalty addition, which is paid as a proportion of the sum assured and is based on the term of the policy. In case of policies that offer no bonus, upon maturity, the sum assured or a refund of the premium or no money is receivable by the insured (depending on the type of policy selected). Cover or Death Benefit - is the amount of money the nominee receives from the insurance company upon the insured’s death. In addition to the sum assured, this would include the bonus, if any. If additional riders such as Accident Death Benefit or Additional Sum Assured have been selected, the amount of money receivable by the nominee could be higher. Returns or Pre-tax yields - Interest earned on the premium, on a compounded basis, is the pre-tax yield. Post-tax yields - If the premium paid for a life insurance policy is used as a tax deduction under section 88, then the effective premium paid by the insured is lower. Interest earned on the effective premium, on a compounded basis, is known as the post-tax yield.
		Which type of policy is best suited for me?
		The type of policy that suits you best depends on many factors, such as your insurance objectives, your income, assets, liabilities, number of dependent members in your family and family expense. Life insurance policies are broadly classified in to three categories
			Endowment policies
			Whole life policies
			Pension policies
		Endowment policies
			Endowment policies cover the insured for a specified period. Thus, the insured may select to insure himself until retirement; e.g. if he is 25 years old, he may choose to insure himself for 35 years, until he reaches the age of 60.
			Upon the death of the insured (during the term of the policy), the nominee receives the sum assured plus the bonus, if any. Bonus is paid for the number of years the policy was in force.
			Upon surviving the term of the policy, i.e. upon maturity, the insured receives the sum assured plus the bonus for the term of the policy, if any. Thereafter, the insured is not covered by the policy.
			Endowment policies are usually more expensive in comparison to whole life policies. Endowment policies are broadly classified into two types - Endowment - Without profit and Endowment - With profit.
			Endowment - Without profit or Term products - offer the nominee the sum assured only, upon death of the insured.Upon surviving the term of the policy or upon maturity, the insured may receive the sum assured or a portion of the sum assured or a refund of the premium only. Typically, such policies are low-cost policies.
			Endowment - With profit policies - offer a bonus (which could be guaranteed) in addition to the sum assured, upon death of the insured or at the end of the term of the policy. These policies cost more than the Endowment – Without profit policies.Currently, four types of Endowment - With profit policies are offered in the market:
		Endowment with profit policies
			Upon death of the insured, the nominee receives sum assured plus bonus for the number of years the policy was in force.
			Upon surviving the term of the policy or upon maturity, the insured receives sum assured plus bonus for the term of the policy. The amount receivable upon maturity is tax-free.
			Many people prefer to buy such policies for terms that mature during their retirement period. Often, the maturity amount is utilized to supplement the pension income (pension income is taxable).
		Money back policies
			During the term of the policy, the insured receives a fixed portion (percentage) of the sum assured at regular intervals. This money received during the term of the policy is tax-free.
			Upon surviving the term of the policy or upon maturity, the insured receives the balance amount of the sum assured plus bonus for the term of the policy.
			Upon death of the insured, the nominee receives full sum assured plus bonus for the number of years the policy was in force. (Money received by the insured during the term of the policy is not deducted from the amount paid to the nominee.)
			Money back policies cost more than Endowment - With profit policies. Many people prefer to purchase such a policy to utilize the money receivable for going on a holiday, re-furnishing their homes or even re-investing the same amount.
		Children’s policies
			The child receives sum assured plus bonus (if any) at a pre-determined time. This money is receivable irrespective of the fact that the proposer is dead or alive.
			The proposer for such a policy could be the parent/guardian/grand parent; he pays the premium for the policy.
			In the event of death of proposer, usually no further premiums need to be paid by the family. However, depending upon the policy type, the child may or may not receive the sum assured upon the death of the insured. However, the policy continues and the child receives the sum assured plus bonus, if any, at the pre-determined time of the policy.
			Upon survival of the term of the policy, the child receives money at the pre-determined time.
			Such policies are best suited for planning children's higher education and marriage expenses.
		Unit-linked policies
			A portion of the premium is invested in the stock market or in a mutual fund. Thus, the returns earned on such a policy are transparent (unit-linked) since they can be tracked on a daily basis.
			The company utilizes balance part of the premium to cover insurance and administrative costs.
			In the event of death of insured, the nominee receives sum assured plus returns earned in the market by the insurance company.
			Upon surviving the term of the policy, the insured receives the returns earned in the stock market by the insurance company. NOT THE SUM ASSURED?
		Whole life policies
			Whole life policies provide insurance until the death of the insured person.
			Upon the death of the insured, the nominee receives the sum assured plus the bonus, if any.
			Whole life policies typically offer no survival benefits, since there is no definitive term to the policy. However, the insured could make withdrawals or take loans against the cash value of the policy.
			Typically, the cash value (the interest or bonus earned on the premium) of a Whole Life policy is higher than that of an Endowment with Profit policy.
			Moreover, the premium for a Whole Life policy is paid for a longer duration of time (since the insurance coverage term is longer). However, the insured has the option of selecting the premium paying term. (Whole life policies provided by LIC do not provide the insured with any benefits during the term of the policy. However, LIC has a new policy which is a combination of an Endowment with Profit + Whole life.)
		Pension policies
			Pension policies provide a regular sum of money to the insured or to his nominee for a fixed period.
			The insured has the option of selecting when and for how long (term) she or he would like to receive the pension amount.
			In the event of death of the insured during the term of the policy, the nominee has the option of taking a lump sum amount or receiving a regular pension for the remaining term of the policy. It is advisable to have a portfolio of policies with varied benefits, as a single policy cannot meet all your insurance objectives.
		How much does life insurance cost?
		The cost of buying an insurance policy depends on:
			Your age, health and the nature of work you do
			The type of policy you select
			The sum assured i.e. amount you insure yourself for
			The term i.e. number of years you insure yourself for
			The premium paying term i.e. number of years you choose to pay premium
			The mode i.e. the frequency with which you choose to pay premium (monthly, quarterly, half-yearly, yearly)
			The riders i.e. additional benefits you select, their term and premium paying term
		Example of an Endowment product for a 30-year old male An Endowment with profit policy, for a sum assured of Rs 100,000, a premium paying term and insurance term of 25 years, can cost between Rs 3,500-4,500 per annum. However, there are a number of riders you can add on to an insurance policy, which could increase your insurance cost by 20-30 per cent. Upon maturity or in the event of death of the insured, the insured or the nominee receives the sum assured plus bonus for the term of the policy. Example of a Term product (or an Endowment without profit policy) for a 30-year old male A Term insurance product, for a sum assured of Rs 100,000, a premium paying term and insurance term of 25 years, can cost between Rs 500-950 per annum. Upon death of the insured, the nominee receives the sum assured immediately; while upon maturity, the insured does not receive any money. Again, a variety of policies are available - some policies offer a refund of the premium to the insured while some offer a portion of the insurance amount or the full sum assured at the end of the term.
		How do I reduce the cost of buying life insurance?
		The cost of a policy could be lowered if you
			Buy insurance at an early age (while the risk is lower)
			Insure yourself for a long period
			Insure yourself for a large sum assured; offer to pay premium annually, thereby receiving discounts
			Select a low cost policy such as a >Term product, which offers negligible to minimum returns upon maturity.
		Do not buy riders or additional benefits that do not seem to add value to you or are available as other insurance policies at lower prices.
		I already have a life insurance policy...
		GOOD! But have you insured yourself adequately? If you are not sure, you can quickly and easily assess how much insurance you would need by answering a few questions in our Insurance Planner. You can then complete the entire insurance buying process
		What should be the duration (term) of my insurance policy?
		Ideally, the term of your policy should be equal to the number of years your family will be dependent on you financially. However, ensure that your insurance payment period is also equal to the number of years you plan to work (and hence is not a burden for you). If you are one of those gentlemen who have been lucky to have a wife that has always been a homemaker, please ensure that you have a pension policy or a whole life policy that takes care of your wife’s needs, in your absence as well.
		What is a medical examination when buying insurance?
		This is the part most agents dislike telling their clients or prospective clients about. Usually, an individual buying insurance for a sum of Rs 600,000 and above has to undergo a medical examination. However time-consuming and cumbersome such a process may appear, an insurance company needs to ensure that the prospective client is healthy. (An insurance company needs to ensure that the prospect’s objective to buy a policy is to genuinely insure against a risk and not a plan to deceive the company.
		Should I buy a life insurance policy even if my employer has insured me in a group insurance scheme?
		It is always prudent to buy an individual life insurance policy because   a) The amount of insurance you are covered for may not be a very large sum    b) If your employer decides on cost-cutting, you may no longer be insured    c) If you decide to leave your employer, you may no longer be covered    d) The older you are when you buy insurance, the higher is the premium you have to pay for the same insurance.
		I am single. Do I need insurance?
		Are you planning to remain single all your life? If not, at some point in time you will need insurance – the earlier you buy it, the lower the premium you have to pay. Even if you are planning to remain single, remember that a life insurance policy is a tool that makes saving compulsory. Therefore, if you buy a life insurance policy that offers decent returns, the amount receivable upon maturity could be a lump sum amount that could be used for your retirement. It would also be advisable to buy a pension policy that would ensure you have a good time when you retire as well.

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