Life Insurance
Life insurance guidance
Life Insurance Guidance
If a home loan or a family depends on your income, life cover decides whether that debt becomes their problem. Suvidhan explains how life insurance works in plain language — the types of policy, how much cover is sensible and what drives the premium — so you can choose cover with your eyes open.
Types of policy
The main types of life insurance
Most policies fall into two groups: pure protection, and protection mixed with saving or investment. The difference decides how much cover each rupee of premium buys.
Term insurance
Pure protection. Pays the sum assured to your nominee if you die during the policy term. There is usually no payout if you survive the term, which is why it gives the most cover for the lowest premium.
Endowment and savings plans
Combine life cover with a saving element and pay a maturity benefit. The premium for the same amount of cover is much higher than term insurance, because part of it goes towards the savings component.
ULIPs
Unit-linked plans invest part of the premium in market-linked funds alongside life cover. Returns are not guaranteed, there are charges to understand, and there is a five-year lock-in.
Whole life plans
Cover that continues for most of your life rather than a fixed term, usually with higher premiums than a term policy of the same sum assured.
Child and retirement plans
Policies built around a goal — a payout when a child reaches a certain age, or an income in retirement. Check what is guaranteed and what depends on bonuses or markets.
Sizing your cover
How much cover is sensible?
There is no single right number, but a sensible estimate usually adds up four things:
1
Income your family would lose
Enough to replace your income for the years your family depends on it. Many people start from a multiple of annual income and adjust.
2
Outstanding loans
Your home loan and other debts, so they do not pass to your family.
3
Future goals
Children's education, a spouse's retirement and other commitments you would want funded.
4
Less what you already have
Subtract existing cover, savings and investments that your family could use.
Life cover and your loan
If you are taking a home loan
A long loan is a commitment that outlives a job, an illness or worse. Think about cover before you sign, not after.
Worth considering
- Term cover at least equal to the outstanding loan amount
- A policy term that runs at least as long as the loan
- Keeping your nominee details up to date
- Telling your family where the policy documents are
Things to check
- Whether a policy offered with the loan is optional — you are entitled to ask
- Whether the premium is being added to your loan amount, so you pay interest on it
- Whether the cover reduces as the loan reduces, or stays level
- How it compares with buying a term policy independently, which is frequently cheaper
Premiums
What affects the premium
Your age
Premiums rise with age, which is why buying earlier costs less over the life of the policy.
Health and lifestyle
Existing conditions and habits such as smoking can raise the premium or limit the cover offered.
Sum assured and term
More cover and a longer term mean a higher premium.
Riders
Add-ons such as accidental death or critical illness cover add to the premium.
Disclose your health honestly. Non-disclosure of existing conditions or habits is one of the most common reasons claims are disputed.
FAQ
Frequently asked questions
What is life insurance?
Life insurance is a contract in which the insurer pays a sum to your nominee if you die during the policy term, in return for the premiums you pay. It protects the people who depend on your income.
What is the difference between term insurance and an endowment plan?
Term insurance is pure protection with no maturity payout, so it gives the most cover per rupee of premium. An endowment plan mixes cover with saving and pays a maturity benefit, but costs much more for the same cover.
How much life cover should I take?
Enough to replace the income your family would lose, clear your outstanding loans and fund major goals such as education — minus the cover and savings you already have. The right number depends on your situation.
Is life insurance compulsory with a home loan?
Not as a rule. Lenders sometimes offer or bundle a policy with a loan. You are entitled to ask whether it is optional and to compare it with buying cover independently.
Does Suvidhan sell life insurance?
No. Suvidhan offers guidance only. We are not an insurer or an IRDAI-registered intermediary, and we do not sell, arrange or recommend specific policies. Buy directly from an insurer or a licensed intermediary of your choice.
