Depending on the plan’s features, life insurance provides protection against the possibility of passing away or permanent incapacity. This makes it essential that you thoroughly comprehend the terms of your life insurance policy.
If you are a family member who earns a living and wants to get insurance, your responsibilities do not end when you pay for the policy and get the policy document. It’s crucial to first have a basic understanding of the phrases used in a life insurance policy before attempting to understand the diversity of others.
Understanding Policy Document Sections
Benefit Illustration
To prevent misselling, the Insurance Regulatory and Development Authority of India (IRDAI) has made it mandatory for benefits of life insurance to be included in policy documents for some policies. The benefit illustration aims to clarify how the amount of investable fraction of premium or return on your policy money would perform at various rates of returns (4% or 8%).
Death Benefit
The death benefit’s specifics are spelt out in the death benefit section. The “exclusions” section should be carefully reviewed along with the other sections because it lists the situations or elements that can render a death benefit invalid or limited, with suicide being the main one.
In most cases, if the insured passes away by suicide before the allotted time, no death benefit would be paid. Some of the advantages will be subject to stated exclusions in the case of riders.
Free Look Period
To guarantee seamless payment at the time of a claim, a responsible policyholder should follow the same procedure. Additionally, you’ll be able to determine whether this coverage is in line with the advantages that the insurance professional described. If not, within the free look period, you may return the policy document.
Depending on how the insurance was issued, the free look period is often 15 or 30 days from the date the policyholder received the “Policy Document”.
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Unit Linked Product
The policy document must include information about the investment fund in the case of a unit-linked product. The fund to which the premium is allocated and how much of it should be known by the insured.
The ability to change the fund into any other fund or a mix of funds is typically provided.
Understanding Legal Terminology
All life insurance plans include a definitions section that explains terms used in the policy because the terminology used to write them is legalese and can be perplexing.
When reviewing your policy, refer to the “definitions” section and ask any questions you have. Never be afraid to ask any questions you may have about the policy.
Nomination
The “life insured” can specify who, if anyone, would get the policy benefit in the event of his passing. The person might be one of your parents, spouses, or children, for instance.
Disputes Section
The claims section outlines the options available to a beneficiary for claiming benefits under the policy and how to submit a claim.
Making A Policy Claim
The policyholder forfeits all of his rights and benefits under lapsed insurance. The policyholder may, however, reactivate the insurance with full benefits (full force) by paying past-due payments with a penalty as determined by the insurer. This process is known as “revival.”
Depending on the type of the plan, revival may be available between three and five years after the date of lapse.
Lock-In Time
Insurance is a long-term agreement the policyholder enters within a set time frame. There is a lock-in period as a result, during which the policyholder cannot exit the policy or withdraw money.
The policyholder may eventually need money owing to an emergency and cannot wait until maturity. In unusual circumstances, there is a provision to surrender or cash in the insurance.
Tax Advantages
The Income Tax Act offers life insurance tax benefits to the policyholder based on the type of plan, both on premium payments and on the maturity amount, due to the intrinsic advantage of a life insurance plan in providing protection. Tax laws may, however, alter in accordance with current legislation.
Ideally, a policyholder should speak with a tax professional about tax-related matters and how to avail of life insurance tax benefits.
Financial objectives vary from person to person. They might change as a result of marriage, having a baby, or changing jobs. Therefore, it is crucial to periodically assess your life insurance needs and modify your life cover and understand all the benefits of life insurance.
