1.

WHEN AND WHO SHOULD BUY A LIFE INSURANCE WHO SHOULD BUY

Should take life Need not take life Need not take life
WHAT IS LIFE INSURANCE insurance insurance insurance
REHMAN SANJANA SURAJ
• In it’s core, life insurance is a risk management tool. 31 year old, 29 Year Old, Single 33 Year Old,
• For most of us, our loved ones are at great financial risk should Married Married
something happens to us Retired parents Parents are doctors No independent
• Life insurance is an effective way to make sure our family’s and financially parents
financial needs are satisfied even when we are not around. independent
Planning kids in No financial Spouse is employed
WHEN SHOULD YOU BUY next 2 years dependents and financially
independent –
Buying in your 20s is beneficial as you can lock in lower premiums achieved FIRE
for the rest of your life Has a home loan of - No Loans
55 lakh
Age you Premium No. of Aggregate Cashflow
start (example) annual premium (with 6%
premiums paid inflation)
during the
term
25 10,000 40 4,00,000 1,59,000
30 12,000 35 4,20,000 1,84,000
35 15,000 30 4,50,000 2,19,000
 2. TYPE OF LIFE INSURANCE
Term Policies – Hell Yes!
POLICY DESCRIPTION Critical Illness – Highly recommended
Term Policies Policy pays on death of the insured
Defined Benefit Critical Illness and Personal accident and Personal accident and disability – frequent traveler or works in
Policies disability hazardous environments
ULIP Investment cum insurance; returns linked to
market performance.
Endowment Policy pays on death or survival till maturity
Plans
Moneyback These policies pay at predetermined intervals
policies
Whole life These policies provide lifelong cover and pay
policies on death whenever it occurs before age 100.
The benefit is also paid at the age 100 if one
survives till that theim. Used to pass on weath
to children.
Group Life Usually term insurance provide by gilts,
Policies associations, employers under one master
policy. The coverage continues until on is a
part of the special group.
Child Plans Investment and insurance products aimed at
creating wealth for child’s future need like
education, marriage etc
Retirement These plans help to secure financial well being
Plans into sunset years. They provide pension on
regular intervals and can have death benefit
associated with it.
 3. RIDERS IN LIFE INSURURANCE HOW TO CHOOSE A RIDER

Name of the rider

RIDER DESCRIPTION Name of the rider Who should take up
Critical illness riders This cover provides additional benefits if Accidental death & disability Working in hazardous
one is diagnosed with specific critical benefit environment
illnesses like Cancer, heart disease ets. It’s
Income Benefit Recommended but not
available as a comprehensive cover and
mandatory
accelerated
Critical Illness rider Recommended
Accidental death and Pays in case death/total disability occurs
Waiver of premium rider Recommended
disability benefit as a result of an accident
Return of premium rider Nobody
Income Benefit/ Some policies offer regular income in case
Limited pay Only with unstable income or
Term Rider the policyholder suffers permanent
business
disability due to an accident to provide for
Increasing/life stage benefits Recommended but not
the family.
mandatory
Waiver of premium Suppose the disability of the insured
riders makes it impossible to pay the future
premiums, this rider ensures that the EXCLUSIONS
policy still continues to provide cover.
Return of premium This rider is activated if one survives the • Death by suicide
rider policy term. Tll the amount premium paid • Death caused under the influence of alcohol/drug abuse
(except taxes) will be returned to the • War/war related activities
policyholder as a survival benifit • Adventure/life threatening activities are not covered in most
Limited Pay Pay a higher amount over a shorter policies
period
• Criminal/unlawful activities
Life stage Increasing/life span benefits and
• Private aviation related deaths are not covered
decreasing covers are not riders, but
important variations in term plans. • Maternity related complication or childbirth
Increasing covers are useful as they help • Death due to pre-existing illness is not covered
increase coverage during the policy • Incorrect information like hiding smoking
tenure. In the decreasing term plan • Death due to natural disasters like earthquake, hurricane etc
coverage reduces gradually during the • If policyholder was murdered by the nominee, claim will be
term of the policy rejected
BUYING GUIDE FOR TERM POLICY
Steps

1. Do a full body medical check up

2. Calculate how much coverage you require
i. FIRE number + major expense + major
liabilities – Liquid Net Worth
3. Use JoinDitto tool
4. Add the required riders or addons
5. Shortlist and schedule call with insurance expert
MISTAKES PEOPLE MAKE WHEN BUYING LIFE INSURANCE
1. Not being careful about the disclosure made to the insurer
2. Just buying the cheaper policy
3. Not having accurate estimate of their coverage needs –
being underinsured
4. Not keeping family in the loop about the cover
5. Not considering riders
6. Buying a policy with too long/ too short tenure
7. Not buying a term plan under married women’s property act
wherever necessary
HOW TO GET OUT OF TRADITIONAL POLICY
NOT REQUIRED