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Life insurance is a contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries upon the death of the insured. The insurance company promises a death benefit in consideration of the payment of premium by the insured.

How Life Insurance Works

There are three major components of a life insurance policy.

  1. Death benefit is the amount of money the insurance company guarantees to the beneficiaries identified in the policy upon the death of the insured. The insured will choose their desired death benefit amount based on estimated future needs of surviving heirs. The insurance company will determine whether there is an insurable interest and if the insured qualifies for the coverage based on the company's underwriting requirements.
  2. Premium payments are set using actuarially based statistics. The insurer will determine the cost of insurance (COI), or the amount required to cover mortality costs, administrative fees and other policy maintenance fees. Other factors that influence the premium are the insured’s age, medical history, occupational hazards and personal risk propensity. The insurer will remain obligated to pay the death benefit if premiums are submitted as required. With term policies, the premium amount includes the cost of insurance (COI). For permanent or universal policies, the premium amount consists of the COI and a cash value amount.
  3. Cash value of permanent or universal life insurance is a component which serves two purposes. It is a savings account, which can be used by the policyholder, during the life of the insured, with cash accumulated on a tax-deferred basis. Some policies may have restrictions on withdrawals depending on the use of the money withdrawn. The second purpose of the cash value is to offset the rising cost or to provide insurance as the insured ages

What Is Term Life Insurance?

Term life insurance, also known as pure life insurance, is life insurance that guarantees payment of a stated death benefit during a specified term. Once the term expires, the policyholder can either renew for another term, convert to permanent coverage, or allow the policy to terminate.

How Term Life Works

Term life policies have no value other than the guaranteed death benefit. There is no savings component as is found in a whole life insurance product. The policy's purpose is to give insurance to individuals against the loss of life. This cash benefit may be used by beneficiaries to settle the policyholder's healthcare and funeral costs, consumer debt, or mortgage debt, among others. Term life insurance is not used for estate planning or charitable-giving purposes. All premiums cover the cost of underwriting the insurance. As a result, term life premiums are typically lower than permanent life insurance premiums.

Characteristics of Term Life

The basis for term life premiums is on a person’s age, health, and life expectancy, which is set by the insurer. If the person should die within the specified policy term, the insurer will pay the face value of the policy. Should the policy expire before the policyholder's death, there is no payout. Policyholders may be able to renew a term policy at its expiration, but their premiums will be recalculated for their age at the time of renewal.

Because it offers a benefit for a restricted time and provides only a death benefit, term life is usually the least costly life insurance available. A healthy 35-year-old non-smoker can typically obtain a 20-year level-premium policy with a $250,000 face value for $20-$30 per month. Purchasing a whole life equivalent will have significantly higher premiums, possibly $200-$300 per month. Because most term life insurance policies expire before paying a death benefit, the overall risk to the insurer is lower than that of a permanent life policy. The reduced risk allows insurers to pass cost savings to the customers in the form of lowering premiums.


Thirty-year-old George wants to protect his family in the unlikely event of his early death. He buys a $500,000 10-year term life insurance policy with a premium of $50 per month. Should George die within the 10-year term, the policy will pay George’s beneficiary $500,000. Alternatively, George does not die and is now 40 years old. His term policy has expired. If he chooses not to renew and subsequently dies, his beneficiary receives no benefit. If he decides to renew the policy, the new policy will base the premium on his current 40 years of age.

Given the nature of such policies, if a policyholder were diagnosed with a terminal illness during a term, once that term expired the individual would not be likely be insurable, though some policies offer guaranteed reinsurability (without proof in insurability). Such features, when available, tend to make the policy cost more.

Term Life Premiums

An insured's age, sex, and health are the primary determinants for calculating the policy premium. Depending on the policy's face amount, a medical exam may be required. Other common factors are the insured's driving record, current medications, smoking status, occupation, hobbies, and family history.

Premiums are flat, or level, for the duration of the contracted term. However, the cost of insurance increases as the life expectancy of an insured decreases. Upon renewal, the policyholder will likely realize a significant increase in premiums. Based on actuarial data, the average life expectancy in the U.S. is 78.86 years. Therefore, a 20-year-old person has a remaining life expectancy of 58.86 as compared to a 50-year-old with a remaining life expectancy of 28.86 years. The risk to underwrite insurance for the 20-year-old is less than the risk to cover a 50-year-old person.

Interest rates, the financials of the insurance company, and state regulations can also affect premiums. In general, companies often offer better rates at "breakpoint" coverage levels of $100,000, $250,000, $500,000, and $1,000,000. Three Types of Term Life

Term insurance comes in three different flavors, depending on what works best for you.

  1. Level term, or level-premium, policies
    These provide coverage for a specified period ranging from 10 to 30 years. Both death benefit and premium are fixed. Because actuaries must account for the increasing costs of insurance over the life of the policy's effectiveness, the premium is comparatively higher than yearly renewable term life insurance.
  2. Yearly Renewable Term (YRT) Policies
    (YRT) policies have no specified term, but are renewable every year without requiring evidence of insurability each year. Early on, premiums are low, but as the insured ages, premiums increase. Although there is no specified term, premiums can become prohibitively expensive as individuals age, making the policy an unattractive choice for many.
  3. Decreasing term policies
    These have a death benefit that declines each year according to a predetermined schedule. The policyholder pays a fixed, level premium for the duration of the policy. Decreasing term policies are often used in concert with a mortgage to match the coverage with the declining principal of the home loan.

Who Will Benefit From Term Life?

Term life insurance is attractive for young couples with children. Parents may obtain large amounts of coverage for reasonably low costs. Upon the death of a parent, the significant benefit can replace lost income.

They are also well-suited for people who temporarily need specific amounts of life insurance.For example, the policyholder may calculate that by the time the policy expires, their survivors will no longer need extra financial protection or will have accumulated enough liquid assets to self-insure.

Term Life vs. Permanent Insurance

The choice between a permanent policy with cash-value insurance product such as whole life or universal life and term life coverage depends on the circumstances and needs of the policyholder.

Cost of Premiums

Term life policies are ideal for people who want substantial coverage at low costs. Whole life customers pay more in premiums for less coverage, but have the security of knowing they are protected for life.

While many buyers favor the affordability of term life, paying premiums for an extended period, and having no benefit after the term's expiration, is an unattractive feature. Upon renewal, term life insurance premiums increase with age, which may make new premiums cost-prohibitive. In fact, renewal term life premiums may be more expensive than permanent life insurance premiums would have been at the issue of the original term life policy.

Availability of Coverage

As noted above, unless a term policy has guaranteed reinsurability, the company could refuse to renew coverage at the end of a policy's term, if the policyholder developed a serious illness. Permanent insurance provides coverage for life, as long as premiums are paid.

Investment Value

Some customers prefer permanent life insurance because the policies can have an investment or savings vehicle. A portion of each premium payment is allocated to the cash value, which may have a growth guarantee. Some plans pay dividends, which can be paid out or kept on deposit within the policy. Over time, the cash value growth may be sufficient to pay the premiums on the policy. There are also several unique tax benefits, such as tax-deferred cash value growth and tax-free access to the cash portion.
Financial advisors warn that the growth rate of a policy with cash value is often paltry compared to other financial instruments, such as mutual funds and exchange-traded funds (ETFs). Also, substantial administrative fees often cut into the rate of return. Hence, the common phrase "Buy term and invest the difference." However, the performance is steady and tax-advantaged.

Other Factors

Apparently, there is no one-size-fits-all answer to the term vs. perm insurance debate. Other factors to consider include:

  • Is the rate of return earned on investments sufficiently attractive?
  • Does the permanent policy have a loan provision and other features?
  • Does the policyholder have or intend to have a business that requires insurance coverage?
  • Will life insurance play a role in tax-sheltering a sizable estate?

Convertible Term Life

Convertible term life insurance is a term life policy that includes a conversion rider. The rider guarantees the right to convert an in-force term policy—or one about to expire—to a permanent plan without going through underwriting or proving insurability. The conversion rider should allow you to convert to any permanent policy the insurance company offers with no restrictions.

The primary features of the rider are maintaining the original health rating of the term policy upon conversion, even if you later have health issues or become uninsurable, and deciding when and how much of the coverage to convert. The basis for the premium of the new permanent policy is your age at conversion.

Of course, overall premiums will increase significantly, since whole life insurance is more expensive than term life insurance. The advantage is the guaranteed approval without a medical exam. Medical conditions that develop during the term life period cannot adjust premiums upward. However, if you want to add additional riders to the new policy, such as a long-term care rider, the company may require limited or full underwriting.

Term insurance plan is a form of life cover, it provides coverage for defined period of time, and if the insured expires during the term of the policy then death benefit is payable to nominee. Term plans are specifically designed to secure your family needs in case of death or uncertainty. It provides specific amount of coverage for specific period of time.

1. Why is the preimums charged for taking a Term Insurance Policy very low?

The premiums for Term insurance policies are the lowest among all the types of life insurance policies. The premiums are low since there is no investment component and the entire premium goes for covering the risk. So if the policy holder expires during the insured term, the death benefit is paid to the nominee. There is no survival or maturity benefit once the policy term expires. There may be some plans that offer to return the premiums paid by the policy holder if he survives.

2. How to choose a best term plan? To choose best term plan you should consider important factors like:

    • How good is the insurance company
    • How much cover do you need
    • Check the claim settlement ratio
    • The factors of inflation in paying the premium and coverage benefits
    • Compare the terms and conditions of various insurance companies
    • You can take two term insurance plans from two different insurance company, it will save you in case of rejection of claim from one of either two companies
    • Do not just look for the low term insurance plan as they might be an important factor but may have several conditions attached for the time of claim
    • You can also go for an online or offline term plan

3. Is there much difference in premium across term plans?

The premium in the term plan could vary from one company to another and as the tenure of your policy increases, the premium for the same sum assured increases.

4. Are there any eligibility criteria for term insurance plan?

The eligibility criterion for term insurance plan varies according to the insurers, the minimum age of entry is 18 years and the maximum age limit is 65 years.

5. Do term insurance plan have an option to convert it to other traditional plans?

The convertible option is provided to you in term insurance plan, and you can convert it to the whole life insurance policy or the endowment plan any time during policy tenure without additional charges.

6. If I missed a premium, is there a chance that my policy may lapse?

If you miss the premium then the first thing is to know the status of your policy through your agent or insurance company. According to Life Insurance Corporation of India (LIC) a grace period of 30 days is allowed where the mode of payment of premium is yearly or half yearly and 15 days in case of monthly payment.

7 Can I surrender an insurance plan?

Yes, you can surrender an insurance plan that is to exit from a plan before maturity. From this the surrender charges would be deducted which varies from policy to policy. No charges are levied if the surrender is done after five years.

8. What are the risks involved in surrendering an insurance plan?

You should only terminate the policy if you feel that it does not fulfil your requirements and if you are in need of cash with no other options left. If you surrender the policy early i.e. three years from its inception then surrender value would be at least 30% of premiums paid, and some insurance companies also eliminate the premium paid in first year.

9. What are the smokers and non-smokers criteria in the term plan?

It includes the smokers or users of any tobacco products, such as chewing tobacco etc. Some smokers who have quit smoking are also eligible for favourable premiums. However the period varies among insurers.

10. What is difference between a participating and non-participating policy?

A participating or profit policy would enable the policyholder to share in the profits of an insurance company which depends on the investment returns of the insurance company. In non-participating policy there is no profit sharing with the insurance company.

11. Will I get a tax benefit on the insurance premium?

Premiums paid for all life insurance policies are exempted from tax up to a maximum of Rs 1 lakh under Section 80C of the Income Tax Act, 1961. The claim amount received by the beneficiaries or bonus in the hands of the policyholder is tax free under Section 10 (10D) of the Income Tax Act.

Group Insurance refers to the type of insurance which covers a ‘group’ of people instead of one individual. The only condition is for all members of one group to be included in a single policy is that the group’s risk should be homogeneous.

The ‘Groups’ can be of two types:

  1. Formal Groups (Employer-Employee): The formal groups include organizations or companies wherein the employer buys the insurance plan to secure the members of his organization. 

  2. Informal Groups (Non-Employer-Employee): Such groups include members of similar cultural or social organization. Here the administrator of the group usually buys the insurance to cover the members of the group.

Advantages For the Employer:

  1. Motivated Employees: In today’s scenario, when medical costs have reached to a great height, corporate health insurance is considered as an added benefit. By insuring against higher hospitalization costs, employers can motivate their employees.
  2. Helps in Retention of Employees: These days more and more companies have become employee-centric and corporate health insurance has become one of the most preferred benefits to attract and retain talented employees. The group policies also cover the family members of the employees, making the employees feel more attached to the organization.
  3. Low Cost: Group health insurance policies can be bought at low or no cost to the employee, as it is like buying in bulk, gives discounts.
  4. Easy Premium Payment Options: Depending on the company’s policy, an employer can choose to pay the premium either monthly, quarterly or yearly as per their convenience. Tax Benefits: Employers get tax benefits on a group health insurance, and the policy can help in reducing their tax liability.

Advantages For the Employees:

  1. Default Insurance Cost: All members of the group get the ‘auto cover’ simply by being part of that group. It ensures basic insurance coverage to people who are without any insurance.
  2. Institutional Support During a Claim: As irrespective of the health state, insurance is offered to all members of the group, it is of great value to people who are looking for a health insurance but cannot get it at an affordable rate because of their current health state.
  3. No Medical Check-Up Is Required: When it comes to a group health insurance, you don’t need to undergo a medical checkup and submit medical reports to get enrolled under a group health plan.
  4. Maternity Coverage from Day 1: From the Day 1, maternity expenses are covered by the group health cover in almost all companies. It means, if you join a company and become the part of a group health insurance, you will get maternity benefits on an immediate basis.
  5. No Waiting Period: There is no concept of waiting period in group health covers and thus, even illnesses like heart issues, diabetes, etc.; are covered from Day 1.
  6. Useful for Employee’s Wellbeing: Group health insurance policies play a crucial role in securing the health of employees and their families.

Extra Benefits with Riders

By adding riders like critical illness and accidental insurance to the health plan, the employer can expand the coverage for critical illnesses. There are various optional benefits like dental treatment, the cost of spectacles, and reimbursement of ambulance costs, which can be availed on payment of additional premium

Health insurance is a type of insurance coverage that covers the cost of an insured individual's medical and surgical expenses.

Insurers use the term "provider" to describe a clinic, hospital, doctor, laboratory, healthcare practitioner, or pharmacy that treats an individual. The "insured" is the owner of the health insurance policy or the person with the health insurance coverage.

Depending on the type of health insurance coverage, either the insured pays costs out of pocket and receives reimbursement, or the insurer makes payments directly to the provider. In countries without universal healthcare coverage, such as the United States, health insurance is commonly included in employer benefit packages.

In the U.S., the number of people with insurance decreased from 44 million in 2013 to fewer than 28 million in 2016, according to the Kaiser Family Foundation. The researchers put this down to recent changes in legislation.

A Commonwealth Fund 2011 report informed that one-fourth of all U.S. citizens of working age experienced a gap in health insurance coverage. Many people in the survey lost their health insurance when they either became unemployed or changed jobs.

The level of treatment in emergency departments varies significantly depending on what type of health insurance a person has.

Salient Features of Health insurance:

Pre and Post Hospitalization: This feature covers pre and post hospitalisation charges for a month or 60 days and the person is reimbursed after submitting bills and other expense related documents incurred during the period of hospitalisation.

Cashless treatment : This feature allows the benefit to get admitted to any listed hospital as per the list of hospitals of the insurance provider without paying anything for treatment. This saves the relatives and friends of the person who has been admitted with stress of arranging money in case of emergency .


Individual Health Insurance Plans : This policy covers takes care of the expenses incurred by an individual in case of hospitalisation and is designed to cover various illnesses with cashless hospitalization and pre and post hospitalisation expenses. There are various riders or top up plans also available along with these plans to individuals which they can opt for.

Surgery & Critical Illness Policy – This plan takes care of the life threatening diseases like Cancer, heart attack, Brain tumours and kidney failures. This plan can be taken as a stand alone policy or can be added as a top up to the existing policy. The premium paid by the policy holder is high in such a plan for the expenses incurred in treatment of the diseases is on the higher side.

Pre-Existing Disease Cover – This policy covers pre existing diseases a person suffers before buying the policy. The diseases can be life style diseases also. The various ailments which a person suffers can be diabetes, hypertension, kidney failure, cancer etc. before the policy comes into effect.

Family Floater Mediclaim: This policy caters to the family members of the policy holder. People who worry about their families can opt for these plans for it covers all family members against diseases under a single cover. The benefit of this cover is that a stipulated sum is insured for the entire family members that can be availed either by an individual member or as a sum total for treatment of one person.

Senior Citizen Health Plan: This plans takes care of people who have reached old age and their medical expenses can be take care of via such plans. As per the rule, every health insurance company should offer cover to individuals till 65 years of age.

General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance is typically defined as any insurance that is not determined to be life insurance. It is called property and casualty insurance in the United States and Canada and non-life insurance in Continental Europe.

Insurance contracts that do not come under the ambit of life insurance are called general insurance. The different forms of general insurance are fire, marine, motor, accident and other miscellaneous non-life insurance.

Description: The tangible assets are susceptible to damages and a need to protect the economic value of the assets is needed. For this purpose, general insurance products are bought as they provide protection against unforeseeable contingencies like damage and loss of the asset. Like life insurance, general insurance products come at a price in the form of premium.

Abhipra Insurance

Types of General Insurance in India

Insurance can be widely segregated in three categories–life, health and general. General insurance is insurance for valuables other than our life and health. General insurance covers the insurer against damage, loss and theft of your valuables. The premium and cover of general insurance depends upon the type and extent of insurance. A general insurance policy typically has a period of a few years. In India, general insurance policies are of the following types:

Motor insurance

Insurance for the damage or theft of your motor vehicle, two-wheeler, three-wheeler or four-wheeler, is covered under this type of insurance. The damage caused to the vehicle can be caused natural or man-made circumstances, the extent of which would change from policy to policy.
Under the Motors Vehicle Act, motor insurance is mandatory in India. New motor vehicles come with third-party insurance right from the showroom itself.

Home insurance

Home and household insurance protects your home and the items inside it. A home insurance policy would also cover natural and man-made circumstances. The contents that are covered under a home insurance policy would depend on the type of policy you buy.

Travel insurance

Another popular type of general insurance is travel insurance, which covers your trips abroad. Travel insurance can be taken to cover loss or theft of your valuables as well as documents. Some travel insurance policies also cover flight delays and medical emergencies. Travel insurance can be taken for personal as well as business trips.

Marine Insurance

Marine insurance is very important because through marine insurance, ship owners and transporters can be sure of claiming damages especially considering the mode of transportation used. Of the four modes of transport – road, rail, air and water – it is the latter most which causes a lot of worry to the transporters not only because there are natural occurrences which have the potential to harm the cargo and the vessel but also other incidents and attributes which could cause a huge loss in the financial casket of the transporter and the shipping corporation.

Incidents like piracy and possibilities like cross-border shoot-outs also pose a major threat when it comes to water transportation and therefore in order to avoid any loss because of such events and happenings, in the interest of the corporation and the transporter, it is always beneficial to have a back-up like a marine insurance.

Fire insurance was started after marine insurance. Marine insurance was useful only to persons engaged in some kind of trade. The fire havoc can be experienced by persons of all walks of life. The Great Fire of London in 1956 destroyed 13,000 houses in four days. This ‘Great Fire’ gave birth to Fire Insurance. Fire insurance is a contract to indemnify the loss suffered by the insured. This contract does not help in controlling or preventing fire but it is a promise to compensate the loss.


A fire insurance is an agreement between two parties, i.e., insurer and insured, whereby insurer undertakes to indemnify the loss suffered by the insured in consideration for his (insured) paying of certain sum called ‘Premium’.

A fire insurance contact may be defined as ‘an agreement’ whereby one party in return for a consideration undertakes to indemnify the other party against financial loss which the latter may sustain by reason of certain subject-matter being damaged or destroyed by fire or other defined perils up to an agreed amount.