1. What are the main types of life insurance?
Life insurance is mainly of two types:
- Term Life Insurance: Coverage for a fixed term (10, 20, or 30 years), lowest premium, and pays death benefit only if death occurs during the term. Ideal for income replacement, loans, and children’s education.
- Permanent Life Insurance: Lifetime coverage with higher premiums and a cash value component that grows tax-deferred. Types include Whole Life, Universal Life, and Variable Life Insurance.
2. How much life insurance coverage do I need?
The required coverage depends on your financial responsibilities. Consider:
- Outstanding debts such as home loans and personal loans
- Income replacement (5–10 years of annual income)
- Future expenses like children’s education
- Final expenses such as medical bills and funeral costs
- Existing assets and savings
3. What factors affect my life insurance premium?
Premiums are calculated based on:
- Age (younger individuals pay lower premiums)
- Health condition and medical history
- Lifestyle habits like smoking and occupation
- Coverage amount and policy type
- Gender (women generally pay lower premiums)
4. Who should buy life insurance?
Life insurance is important for:
- Primary income earners
- Parents with dependent children
- Married couples with shared financial liabilities
- Business owners with partners or employees
- Anyone with financial dependents
5. What is the underwriting process?
Underwriting is the insurer’s risk assessment process and includes:
- Application with personal and medical details
- Medical examination (for higher coverage)
- Review of medical records
- Risk assessment
- Final approval with premium and policy terms
6. What are policy riders?
Policy riders are optional add-ons that enhance coverage:
- Accelerated Death Benefit
- Waiver of Premium
- Child or Spouse Rider
- Accidental Death Benefit
7. What happens if I miss a premium payment?
- Grace period of 30–31 days is provided
- Policy may lapse if payment is not made
- Policy can be reinstated within 3–5 years, subject to conditions
8. Are life insurance death benefits taxable?
- Death benefits are generally income tax-free
- Estate tax may apply if the estate value is high
- Interest earned on delayed payouts is taxable
9. How do I choose the right life insurance company?
Consider the following before choosing an insurer:
- Financial strength ratings (A.M. Best, S&P)
- Compare premiums across companies
- Claim settlement and customer service record
- Policy exclusions and terms
10. When should I review my life insurance policy?
Review your policy:
- After major life events like marriage or childbirth
- When income changes significantly
- After taking large loans like a home loan
- Every 3–5 years as a routine check
11. What are common misconceptions about life insurance?
- “I’m too young or healthy” – younger age means lower premiums
- “Employer insurance is enough” – it’s usually limited
- “Stay-at-home parents don’t need insurance” – their role has financial value
- “Life insurance is expensive” – term plans are affordable
