What is Life Insurance?
Life Insurance is a contract between the Insurance Company and the Insurance Policyholder where Insurance company guarantees to pay a certain sum of money to the beneficiary in case of the insured individual’s death or at the end of the pre-determined policy term in exchange for a premium.
Upon completion of the pre-determined policy term, the policyholder receives a sum assured on maturity or the maturity benefit from the insurer along with some bonuses. And in case the policyholder passes away during the policy tenure, the insurance company will offer a lump sum amount to his/her nominee. This lump sum amount is called the sum assured on death or the death benefit.
Types of Life Insurance in India
- Term Life Insurance Plans
- Endowment Plans
- Unit Linked Insurance Plans (ULIP)
- Money-Back Plans
- Whole Life Plans
- Child Plans
- Annuity/Pension Plans
Documents Required for Buying a Life Insurance Policy
Following are the documents you will require to purchase a life insurance policy:
- Passport-sized photographs
- Age Proof (Driving License / PAN Card / Passport / SSC Certificate)
- Proof of Residence (Passport / Telephone Bill / Electricity Bill / Ration Card / Water Bill / Voter ID)
- Identity Proof (Ration Card / Voter ID / PAN Card / Passport / Driving License)
- Proof of Income (Pension Pass Book / Income Tax Returns / Form 16 / Salary Slip)
How to Claim Life Insurance?
If you have proper documents then filing a claim procedure is very easy. If a person follows all step then you can get a claim on time also. Life insurance claims are made under two circumstances:
- Death of the life insured
- Maturity of the life insurance policy
How to file a claim in case of death?
The first and foremost thing is to inform the insurance company as soon as possible. You can inform them on their customer care telephone number or inform them over email. Provide all the information like name of the policyholder, policy number, time of death, place of death and cause of death.
In case of a natural death or accidental death, the nominee needs to submit below some documents to process the claim smoothly.
- Original Insurance Policy
- Duly filled claim form
- Death Certificate of the policyholder
- Discharge form (if hospitalized) which has to be signed with witnesses
- Deeds of assignments if any
- Post-mortem reports and hospital and attending doctor’s reports if required
- If a claim is made by someone other than the nominee or assignee, the person making the claim will have to submit legal proof of his/her title
- In cases involving police inquiries, an inquest report will have to be submitted
Once the beneficiary submitted all the documents as required by the Insurance Company, the company will verify all the information and once it is verified, the claim will be settled by the Insurance Company. The insurance company may ask the beneficiary’s bank details to settle the claim amount. They can also ask the nominee’s identity proof. Normally this procedure takes a month but it depends.
How to file a claim in case of Maturity?
If policy matured, the policyholder is eligible to avail sum assured with the maturity benefit from the insurer along with some bonuses. However, the policyholder must make sure that all the premium have been duly paid, no premium is due.
It is a simple process in case of your policy matured. When the policy is about to mature, the insurance company intimate to the policyholder at least 1-2 months in advance. They provide all the detail like maturity date, maturity amount, and discharge voucher. The discharge voucher is like a receipt. The policyholder needs to sign on the discharge voucher in the presence of witnesses and send it back to the insurance company along with the original policy.
If the policyholder nominated someone for the policy then the nominee must sign the discharge voucher to the insurance company. After getting all the details from the policyholder, the insurance company starts their procedure and settled their claim on time.
How to Save Tax with a Life Insurance Policy?
Life Insurance market is not properly covered in India. There is a huge possibility in this market of this product. The government is also initiating to improve this market. They are also encouraging people to buy life insurance and provide tax benefits also. Here are the points where you can save your tax.
Section 80C of the Income Tax Act Deduction: You are eligible for a deduction under Section 80C of the Income Tax Act if you are paying a Life Insurance premium for you or your family (parents, children, or spouse). However, in order to be able to claim the said deduction, the premium amount (being paid by the policyholder) must not be more than 10% of the sum assured amount, in case the policy was issued after 1 April 2012.
Section 10(10D) Maturity Deduction: If the premium amount (being paid by policyholder) does not surpass 10% of the sum assured for plans that have been issued post 1 April 2012 and 20% of the sum assured for plans that have been issued before 1 April 2012, then the maturity amount that the policyholder receives at the end of the policy term will be completely exempt from tax as per Section 10(10D) of the Income Tax Act, 1961.