Life Insurance is a contract signed between the policyholder, i.e., an indivi- dual, & a life insurance company, i.e., the insurance provider. The policyholder pays a certain amount of premium at fixed intervals of time. The insurance company pays the beneficiaries the amount insured on the insured event, such as death or a benefit defined at the maturity of the plan.
It can be used in meeting the mentioned financial goals:
• Financial cover against life
• Post-retirement income for NRIs
• Pension or regular income post-retirement
• Children Education
• Purchasing a house
• Children Marriage
How to buy Life Insurance Online?
Let us now have a look through the process of buying Life Insurance online:
Step 1: The official insurance provider’s webpage should be opened to find out the premium amount. Next, click “Calculate Premium.”
Step 2: Personal details such as name, contact number, gender, date of birth, smoking or non-smoking status, annual income, etc. should then be entered. Next, click on the tab “Calculate Now’.
Step 3: Input the amount of insurance along with its tenure & then click “Proceed”.
Step 4: Select the additional riders you want to be included, & then click “Proceed” again.
Step 5: Complete the insurance policy form with the information required & click the tab “Proceed”.
Step 6: Select the desired mode of payment & click the tab “Pay” to complete the transaction.
Factors Affecting Life Insurance Premium
Mentioned are the factors that affect life insurance premiums:
• Age: It is considered one of the prime factors affecting the premium amount. The premium is comparatively lower for the younger generation & keeps increasing with a gradual increase in age.
• Gender: According to some studies, it is proven that women survive for longer periods than men. Hence, the premium amount is comparatively lower for women.
• Health Conditions: In case of any pre-existing illness that may affect the present health conditions, a higher premium would be charged.
• Family Health History: In case of any genetic or hereditary disease runs in your family, the premium amount will be higher.
• Smoking & Alcohol Habits: Habits like drinking alcohol & smoking, which are lifestyle-related, lead to multiple health issues. Due to this, insurance companies charge a higher premium for individuals who drink or smoke.
• Type of Coverage: What type of insurance coverage is required should also be well known as it plays a vital role in ascertaining the amount of premium. For example, if there are any additional riders to your insurance plan, the premium will increase. In the case of longer tenure, the premium will also be higher than that of shorter tenure. Also, the type of plan chosen affects the amount of premium.
• Amount of Coverage: The higher the amount covered, the higher the premium amount & vice versa.
• Occupation: If your job is at a higher risk, the life insurance premium amount would also be higher & vice versa.
Provided below are the Benefits of Life Insurance:
• Financial Security: Whenever a life insurance policy is bought, the insurance company will charge a premium to provide financial security to the policyholder’s beneficiaries in the unfortunate event of demise. The family members can use the life insurance proceeds to secure their future & meet routine expenses.
• Wealth Creation: Life insurance policy helps to secure future needs in terms of finance, offering good returns & income.
• Tax Benefits : Multiple tax benefits are offered by life insurance, such as the premium paid gets a deduction of up to INR 1.5 lakhs per annum u/s 80C & maturity benefits therefrom are also tax-free subject to certain terms & conditions u/s 10(10D) of Income Tax Act, 1961.
• Builds Saving Habit: The premium amount is to be paid to keep the policy active, i.e. else it will get cancelled. Thus, it inculcates a habit of regular savings, which benefits in the long run.
• Helps to achieve financial goals: Some policies like ULIP help build a cash value over a period of time, as these plans have an investment component as well. The premium amount gets invested in marketable securities, & the return is earned. Over a period of time, it becomes a large corpus that will help achieve goals.
Mentioned are the different sections of the Income Tax Act 1961:
• Section 80 C : This section helps reduce the policyholder's tax liability by paying the premium towards the life insurance policy. One can avail of a tax deduction of up to INR 1.5 lakhs per annum.
• Section 80 D: This section allows one to get a tax deduction by making payments towards health insurance premiums against the policy taken for self, spouses, children, & parents. The maximum tax benefit can be up to INR 25,000 per annum & INR 1,00,000 in case the insured or his parents are above 60 years of age. Along with such benefits, one can also avail oneself of INR 5000 worth of preventive healthcare benefits.
• Section 10(10D): This section provides tax exemption on the proceeds of the policies received upon maturity, including life insurance policies & death or maturity benefits.
• Section 80CCC: This section allows tax deductions when making payments of the premium of pension or retirement plans, a maximum of up to INR 1.5 lakhs a year. In case the policyholder surrenders the policy, the amount received thereon shall be taxable as income in case the deductions are claimed under section 80CCC.
• Sec 10(10A): This section allows commuted pensions or proceeds from pension funds to be exempt from tax for government employees.
• Section 80CCE: This section restricts the maximum deduction amount u/s 80C, 80CCC, & 80CCD to INR 1.5 lakhs per annum.
As we know, human life is subject to many risks & uncertainties due to natural & accidental mishappenings. Life insurance provides financial cover for contingent events like death, accident, disability, etc. The different life insurance plans provide money on the unfortunate demise of the policyholder to the family members, which brings financial security to them. The proceeds from the insurance claim can be used to meet daily expenses, hence ensuring financial security.
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