Which is a contract between an individual and an insurance company whereby the individual pays a premium and in exchange?

Life Insurance - Meaning

Life Insurance can be defined as a contract between an insurance policy holder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period. Here, at ICICI Prudential Life Insurance, you pay premiums for a specific term and in return, we provide you with a Life Cover. This Life Cover secures your loved ones’ future by paying a lump sum amount in case of an unfortunate event. In some policies, you are paid an amount called Maturity Benefit at the end of the policy term.

There are two basic types of Life Insurance plans -

1. 1. Pure Protection
2. 2. Protection and Savings

What is Pure Protection Plan?

A Pure Protection plan is designed to secure your family’s future by providing a lump sum amount, in your absence.

What is Protection and Savings Plan?

A Protection and Savings plan is a financial tool that helps you plan for your long-term goals like purchasing a home, funding your children’s education, and more, while offering the benefits of a Life Cover.

Click here to know more about different types of Life Insurance Plans.

Factors that affect life insurance premium

Now that you know what is life insurance and why you need it, find out the factors that can affect the life insurance premium:

• Age: One of the prime factors that affect the premium for a life insurance plan is your age. The life insurance premium is lower for younger people and gradually increases with age
• Gender: Studies have shown women live longer than men1. Therefore, the life insurance premium is lower for women as compared to men
• Health conditions: Your present and past health conditions can determine the premium for your life insurance plan. If you have any pre-existing illnesses or have suffered from an illness in the past that may resurface or affect your present health, you would be charged a higher premium
• Family health history: The chances of suffering from a disease that runs in your family are considerably high. So, if any hereditary illnesses run in your family, you may have to pay a higher premium
• Smoking and drinking alcohol: Lifestyle habits like smoking and drinking alcohol can impact your health and lead to multiple health issues. Therefore, insurance companies charge a high premium for individuals who smoke or drink alcohol
• Type of coverage: The type of coverage you opt for can increase or decrease the life insurance plan’s premium. If you add any riders to your plan, the premium would increase. A longer policy term can also result in a higher premium compared to a shorter term. In addition to this, the type of life insurance plan you select also impacts the premium. For instance, term life insurance is the most affordable form of life insurance
• Amount of coverage: A higher sum assured would result in a higher premium and vice versa
• Occupation: If you work in a high-risk job, the premium for your life insurance plan would be higher than others. For example, if you work in construction or if your job puts you at any kind of risk, such as regular exposure to chemicals, the insurance company will charge a higher premium

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Let us understand some commonly used terms in Life Insurance:

• Life Assured: It is the person who is covered under the insurance policy
• Proposer: It is the person who pays the premiums of the policy. For example: If you have bought the policy for yourself, then you are both the Life Assured as well as the Proposer. Similarly, if you purchase an insurance policy for a family member, then you are the proposer and the family member is the Life Assured.
• Nominee or Beneficiary: It is the person you appoint at the time of buying the policy to receive the benefits of your insurance policy, in your absence.
• Insurer: The insurance company that sells the life insurance policy is called the Insurer (for example, ICICI Prudential Life Insurance).
• Life Cover: It is the amount that the Insurer will pay to your Nominee in case of an unfortunate event.
• Maturity Benefit: For Protection + Savings policies, the Insurer pays a certain lump sum of money on completion of the policy term. This amount is known as the Maturity Amount.
• Premium: A premium is the amount you pay to the insurer for receiving the benefits of the insurance policy. These payments can be made on a regular basis throughout the policy duration, for a limited number of years or just once, as per the options available under the policy you choose.
• Premium Payment Term: The number of years for which you pay the premiums is known as the Premium Payment Term.
• Policy Term: The number of years for which the Life Cover continues.

Let us understand how Life Insurance works:

In today's era, having a life insurance policy is a must for every individual as it is one of the best ways to secure one's future along with their loved ones. There are many different types of life insurance policies available in the market. However, before choosing one, it is important to understand how a life insurance policy works. Let us look at an example to understand how life insurance works:

Now, let’s see an example:

Mr. Kumar (Life Assured) pays ICICI Prudential Life Insurance (Insurer) an annual amount (Premium) over 5 years (Premium Payment Term) to make sure that his wife (Nominee) gets a certain assured sum of money (Life Cover) in case of an unfortunate event during the 10 years or Lumpsum amount at maturity on survival at the end of policy term.

Life insurance not only covers the risk arising due to an unfortunate event, but also gives you additional benefits like tax benefits, savings and wealth creation over a period of time. The right life insurance plan from a trusted company can help one get long-term risk cover plus savings, i.e. dual benefits from one solution.

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FAQs

1. Is life insurance worth buying?

Yes, life insurance is a worthy purchase. Anybody with financial dependents will find the benefits of buying life insurance attractive. In case of the demise of the only income earner, a life insurance policy becomes a financial safety net that helps your loved ones pay for expenses such as a loan, childcare, education, health, and many other everyday bills. Life insurance is an affordable way to financially protect the people you love most.

2. How to claim life insurance after death?

It is a simple process. You can report your claims online, at our branches, central office, via SMS, e-mail or through our call center as per your convenience. Physical documents will be required to be sent to the nearest branch to start the process. The documents needed are:

In addition, below Documents required for Accidental/ Suicidal Death

• Post Mortem Report and chemical viscera report
• FIR/ Panchnama/ Inquest Report and final investigation report
• Copy of driving license if Life Assured was driving the vehicle at the time of accident (applicable if 'Accident and Disability Benefit Rider' is opted)

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Next, our claims department/team will assess the claim and inform in case any further documents need to be submitted. Once your claim is intimated and the life insurance company receives all the relevant approvals and then settle all the valid claims through cheque or Electronic Clearance System (ECS)

3. How many beneficiaries can be on a life insurance policy?

There is no limit on the number of beneficiaries you can add to your policy. However, if the insured has a will and it specifies who the amount of the insurance benefit should go to after he/she passes away, then the benefit will go to the person mentioned in the will irrespective of the mentioned nominee.

4. How long does it take to get life insurance amount after a death?

• With ClaimForSure, we provide guaranteed death claim settlement within one day*, making sure your family receives financial support when it needs it the most. In case there is any delay beyond one working day, your nominee will be paid interest* on the claim amount for every day of delay

To avail ClaimForSure,

• Policies have to be active for a continuous 3 years with all due premiums paid
• All mandatory claim documents* should be submitted at the branch before 3 pm on a working day
• Total claim amount of all policies should be less than or equal to ₹1.5 Crore
• Claim must be a non-investigative case

Otherwise for all other claims, our average turn-around time for settling a claim as of FY 18-19 is 2.34 days**, with 79% of claims being settled within 3 days.

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* Day 1 is counted from the day of receiving the last document. All due premiums in the policy have been paid and the policy has been active for a continuous period 3 years. Mandatory document to be submitted at Branch Office before 3pm on a working day- Original policy certificate, copy of death certificate by local authority, Nominee’s current address proof, photo identity proof, Cancelled cheque. Copy of bank passbook, Copy of medico legal cause of death, Medical records (Admission notes, Discharge / Death summary, Test reports, etc.). For accidental death – Copy of FIR, Panchanama, Inquest report, Driving license. Interest shall be at the bank rate that is prevalent at the beginning of the financial year in which death claim has been received. In case of breach in regulatory turnaround time, interest will be paid as per IRDAI regulations.

** The average TAT is calculated from the last document received to payment disbursal date for non-investigated claims.

1 Why do women live longer than men? - https://ourworldindata.org/why-do-women-live-longer-than-men

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