Who can buy a life insurance policy?
Any person above 18 years of age, who is eligible to enter into a valid contract, can go for an insurance policy. Subject to certain conditions, a policy can be taken on the life of a spouse or children.
These are the simplest policies to understand. You pay a fixed premium every year based on your age and other factors; you earn increases in the policy’s surrender value as the years roll by and your beneficiaries get a fixed benefit after you die. The policy takes you into old age for the same premium you started out with. Whole life insurance policies are valuable because they provide permanent protection and accumulate surrender values that can be used for emergencies or to meet specific objectives. The surrender value gives you an extra source of retirement money if you need it.
An endowment life insurance policy is designed primarily to provide a living benefit. Therefore, it is more of an investment plan. Endowment life insurance pays the face value of the policy either at the time of death of the policyholder or at the time of maturity of the policy. The policy is a method of accumulating capital for a specific purpose and protecting this savings program against the saver’s premature death. Many investors use endowment life insurance to fund anticipated financial needs, such as college education or retirement. Premium for an endowment life policy is higher than that of a whole life policy.
It is an endowment policy for which a part of the sum insured is paid to the policyholder in the form of survival benefits, at fixed intervals, before the maturity date. The risk cover on the life continues for the full sum insured even after payment of survival benefits and bonus is also calculated on the full sum insured. If the policyholder survives till the end of the policy term, the survival benefits are deducted from the maturity value.
Annuity schemes are those wherein policyholders regular contributions over a period of time (or a one-time contribution) accumulate to form a pool with the insurance company. This pool is used to yield a regular income that is paid to policyholders until death starting from your desired age. Some annuity schemes have the option to pay your survivors a lump sum amount upon your death in addition to the regular income you receive while you are alive.
Life insurance is normally offered after a medical examination of the life to be insured. However, to facilitate greater spread of insurance and also as a measure of relaxation, State Life has been extending insurance cover without any medical examination, subject to certain conditions. This facility is called Non-medical Scheme.
There are only two policies available for the newborn. These are Child Education and Marriage Assurance and Child Protection Assurance. Child Education and Marriage Assurance provides a lump sum benefit for the child at the completion of the policy term and also has a family income benefit in case of death of policyholder (Allah forbid). Child Protection Assurance is a joint life assurance and covers the lives of child and either of the parents. For these plans, age of the child should be above six months.
Yes, there are two policies on which you will not get any money on Maturity. These are Term Insurance by Annual Premium and Term Insurance by Single Premium.
State Life distributes its profits among it policyholders every year in the form of bonuses. Bonuses are credited to the account of the policyholders and paid at the time of maturity. Bonus is declared as a certain amount per thousand of sum assured.
In some policies, a part of the sum insured is paid to the policyholder in the form of Survival Benefits, at fixed intervals before the maturity date. The risk cover for life continues for the full sum insured even after payment of survival benefits and bonus is also calculated on the full sum insured. If the policyholder survives till the end of the term, the survival benefits will be deducted from maturity value.
Premiums other than single premiums can be paid by the policyholders to State Life in yearly, half-yearly, quarterly or monthly installments.
The amount payable by State Life on termination of the policy contract at the desire of the policyholder before the expiry of policy term is known as the surrender value of the policy. Policy will acquire a surrender value after it has been inforce for at least two consecutive years provided no premiums are in default. The bonus is also added to the surrender value if the policy has been in force for at least 3 years.
Death claim is usually payable to the nominee/ assignee or the legal successor, as the case may be. However, if the deceased policyholder has not nominated/ assigned the policy or not made a will, the claim is payable to the holder of a succession certificate or such evidence of title from a Court of Law.
When the policy money becomes due for payment on the death of the policyholder, it can be paid only to that person who is legally entitled to give a valid and effective discharge to the Corporation. If the policy bears nomination, the claim is settled in favour of the nominee. Similarly, if the policy is assigned, the assignee receives the claim amount. It should be noted that an assignment of a policy automatically cancels the existing nomination. Hence, when such a policy is reassigned in favour of the policyholder, it is necessary to make fresh nomination.
When a policyholder wants to change his address in State Life’s records, notice of such change should be given to the zonal office servicing his policy. Policy records can be transferred from the zonal office that services the policy to any other zonal office nearest to the policyholder’s place of residence. The correct address facilitates better services and quicker settlement of claims.
When the premium is not paid within the days of grace provided after the due date, the policy lapses. The grace period in case of yearly, half-yearly and quarterly modes of payment is one month and in case of the monthly mode of payment, it is 15 days.
A lapsed policy may be revived during the lifetime of the life insured, but within a period of 5 years from the due date of the first unpaid premium and before the date of maturity. Revival of a lapsed policy is considered either on non-medical or medical basis depending upon the age of the life insured at the time of revival and the sum to be revived.
No alteration is permissible in the policy document – the evidence of contract, unless both the parties to the contract agree. After the policy is issued, a policyholder in a number of cases finds the terms not suitable to him or her and desires to change them to suit his or her convenience. State Life also realizes that insurance being a long-term contract, certain changes under given circumstances might necessitate an alteration of the contract. Keeping in view the basic principles of insurance and administrative convenience, State Life permits some alterations. As a rule, State Life will not permit alterations within the 1st year from the commencement of the policy.
The loss or destruction of a policy document does not in any way absolve the Corporation of the liability of payment of policy monies when the claim arises. If the policy is lost or destroyed, claim or sum insured will be paid to the claimant or policyholder after he or she furnishes an indemnity bond jointly with two sureties. Similarly, a policy can be surrendered even if the original policy document is lost. However, for the purpose of loan or survival benefit one has to obtain a duplicate policy. The policy being a legal document, the issue of duplicate policy involves the normal procedures like issuing a newspaper advertisement.
A lapsed Life Insurance policy can be revived within 5 years from the date of the first unpaid premium.
It is not possible to raise money against your life insurance policy. However, there is a provision available by way of assignment or mortgaging the policy provided the policy has been in force for a minimum stipulated period.
In case the policy is lost, policyholder should get a duplicate policy issued. State Life issues it after completion of certain formalities and a nominal fee.
A lapsed policy can be revived within five years from the date of the first unpaid premium.
The calculation of life insurance premiums is primarily based on four factors – age of the person to be insured insured, type of policy, sum insured and term of the policy.
Life insurance is mainly considered as a saving instrument rather than an investment avenue as it promotes compulsory savings besides protecting the family of the policyholder in the event of unforeseen happening. It is the only saving instrument, which covers the life risk. A loan can also be availed against the State Life insurance policies.
Planning for the financial consequences of a premature death is an essential part of every financial plan. Generally, the consequences are simply too large to ignore and cannot be totally covered with your own resources.
Life insurance is nothing but a contract with an insurance company under which the insured (purchaser) pays a premium in exchange for coverage of specified losses. Life insurance protects your family against the risk of the premature death of you (or your spouse). Life insurance planning should consider your family’s short-term needs (for example, medical expenses) and long-term needs (for example, replacing your income).
In the course of our life we are accosted by risk-that of failing health, financial losses, accidents and so on. Insurance is a means by which life’s uncertainties are addressed in financial terms. It offers a monetary compensation against those losses. Insurance is considered more as a hedging mechanism rather than a true investment avenue. Life insurance, in particular is essentially acknowledged as a mechanism which eliminates risk substituting certainty for uncertainty primarily by transferring risk from the insured to the insurer.
At present loans are granted up to 80% of the Surrender Value for policies, where the premium due is fully paid-up. The rate of profit or return charged is 10% per annum compounded semiannually.
Policyholders are eligible to take loan on their policies subject to certain rules and regulations.
The policyholder has to apply for loan in a prescribed form and submit the policy document with the form duly completed.
Currently State Life is charging 12.5% interest on policy loans. Interest is payable half-yearly.
A policyholder can repay the loan amount either in part or in full anytime during the term of the policy.
What happens if the loan is not repaid?
If loan is not repaid during the term of the policy or early claim, the amount of loan plus profit or return, if any, will be deducted from the claim money and the balance amount will be paid to the person making the claim.
The very fundamental principle of spreading of the risk is actually practiced by the insurance companies by reinsuring the risks that they have insured.
Underwriting of a risk involves consideration of material facts on the basis of which a decision will be taken whether to accept the risk and if so at what rate of premium.
If the policy has acquired a surrender value and a premium has remained unpaid beyond the grace period, the policyholder will entitled to benefits under one of the following two options given hereinafter, depending on the option exercised (if any) in his Proposal for this policy:
Option A : Automatic Paid-up
Option B : Automatic Premium Loan
Provided the surrender value of the policy exceeds the total of due premiums(s) remaining unpaid and any other amount owed to State Life. The option can be exercised at the time of taking the policy or at any time thereafter while the policy is in force. The option can be changed subsequently by written intimation to and endorsement in the policy by State Life, so long as no premiums remain unpaid beyond the grace period. If no option has been exercised by the policyholder, benefits under “automatic paid-up” option will apply.
A – Automatic paid-up Option
This policy will be converted into a paid-up policy. The paid-up Sum Insured will be specially calculated to allow for the clearance of all outstanding dues of State Life against the policy. No further premium(s) will be payable but the sum insured will be reduced. Any bonuses attached to the policy will be taken into consideration while determining the paid-up sum insured. A policy once paid-up will not be entitled to any further bonuses. If the specially calculated paid-up sum insured works out to be less than Rs.100/ the policy will not be converted into paid-up but will be treated as having been forfeited losing all its benefits. A policy thus made paid-up may be revived for full sum insured as per provision of condition No-4 above.
B – Automatic Premium Loan Option
So long as the net surrender value of the policy equals or exceeds any due premium remaining unpaid beyond its grace period, State Life will continue to keep this policy in full force, and treat the said premium as paid by creating an automatic premium loan against the net surrender value of the policy. When the net surrender value of the policy becomes less than a due premium remaining unpaid beyond its grace period, the policy will be kept in full force for a further broken period. This broken period will bear the same proportion to the full period of the unpaid premium as the net surrender value bears to the unpaid premium. The policy; will automatically be forfeited and lose all benefits at the expiry of the said broken period. Profit or return (however called or described) will be charged on automatic premium loan at rates determined by State Life from time to time, so long as any automatic premium loan along with profit or return (However called or described) is outstanding against this policy, any; payment received by State Life will first be applied to reduce this debt.