9 Interesting Facts About Life Insurance

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Introduction

We plan journeys with great care, ensuring that every detail is looked into, be it transport, accommodation, food, or even sightseeing. Every day in life is also a journey—one that we embark on with our family and friends. So, we must plan for it with great care as well. Life insurance is one such planning tool.

Also, our physical and mental health cannot be taken for granted. Just like a travel plan, we have to plan for our future. Life insurance is a defence against the unforeseen. It is a highlighted feature of the financial planning checklist. If you ask people, “what do you know about life insurance?” few will be able to give a satisfactory answer. The India Protection Quotient Survey found that life insurance ownership among urban Indians is still at 78%. Increased awareness of the benefits of life insurance and greater adoption are the need of the hour.

What Do You Know About Life Insurance?

Life insurance, in simple terms, is an investment to manage risk. Like other material possessions, it insures human life. It is a legal contract between a person and the insurer. It ensures that your family gets survivor benefits in your absence. The insurer pays out this benefit amount as a lump sum. The industry term for this is insurance coverage or life cover. The number of years for which the policy is valid is the policy term.

We can get life insurance by paying annual premiums. A premium is a periodic amount paid to insurers. You have to pay premiums only for the premium payment term. Several factors dictate the premiums we will need to pay:

Age and Gender
Profession
Pre-existing health conditions
Whether you smoke or drink
Family health history
Type of coverage and the coverage amount you want

9 Interesting Facts About Life Insurance

1. Term Life Insurance vs Whole Life Insurance:

Term life insurance is a pure risk cover. The term is the duration after which the benefits will expire. Suppose the term is 40 years. The insurer will provide death benefits only in this term. Whole Life insurance provides coverage for the entire life. They are not limited to a specified term.

2. Unit Linked Plans (ULIPs):

These are a combination of insurance and investment. The premium that you pay ends up in two destinations. A part goes to insurance coverage. The remaining is invested in financial funds of your choice. This is a smart way to develop regular investing habits.

3. Provide accurate information:

The insurance contract is a legal document. It requires that all the information you disclose is correct. The chances of claims getting rejected increase otherwise.

4. You can ‘pledge’ loans from your insurance provider:

Most insurers provide loans against the insurance policy. They call it ‘pledging’. Getting loans against life insurance policies is uncommon in India. Most policyholders are not even aware of this option.

5. Only 3 out of 10 people have life insurance in India:

As mentioned above, the life insurance penetration is 3% in India. From being at 2.6% in 2014, now the figure is increasing. These Indian figures are at par with the international market. This shows that very few people take life insurance. The Economic Survey of 2022 provides this data.

6. India is the 5th largest life insurance market in the world:

It is also among the emerging insurance markets. It is growing steadily by 32-34% each year. Due to sheer competition, the industry’s products are improving. There are about 24 life insurance companies. Only Life Insurance Corporation (LIC) is a public sector company. In 2022, the Indian government plans to sell a 7% stake in LIC. This will be the largest initial public offering (IPO) of Rs. 50,000 crores. All this data is as per the Indian Brand Equity Foundation’s (IBEF) report for FY 2021-2022.

7. Average claim settlement ratio (CSR) of 97.56% in 2021:

The Insurance Regulatory and Development Authority of India (IRDAI) governs insurance. According to their report on FY2021-2022, the average CSR was 97.56%. Private insurance company Max Life had the highest CSR of 99.35%.

8. Thumb rule for coverage amount:

The ideal life insurance coverage depends on your monthly income. It must be enough to sustain your monthly expenses for 3 years. Also, the insurance coverage must be 10 times the annual income. Always compare CSR and coverage amounts before buying life insurance.

9. Tax Benefits:

Buying life insurance will get you tax benefits. The premiums you pay make you eligible for tax exemptions. This is as per Section 80C of the Income Tax Act, 1961. The exemption is up to Rs. 1.5 lacs. Any survivor family also receives tax-free death benefits.

Conclusion

We can now answer the question what do you know about life insurance? Buying life insurance has many benefits. It helps in risk management and is also a smart investment. India is a growing life insurance market. We are the 2nd-largest insurance technology market in the Asia-Pacific region. This is according to the S&P Global Market Intelligence data 2021.

So, what are you waiting for? Secure your family’s financial future and live with peace of mind.