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Features of Life Insurance

A life insurance is a financial tool with various benefits. The primary feature of a life insurance is to provide a financial safety net for your family in case of your early demise. If you survive the policy term, the maturity benefits you get can be utilised to fulfil your long-term financial goals. The corpus created also makes you financially independent on your retirement. The multiple benefits of life insurance policies make them a must-have in your financial planning. Read on to understand the features of life insurance and its importance at various life stages.

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Features of Life Insurance

Features of Life Insurance in India

Features of Life Insurance
August 08, 2024

Table of Content

 

What are the Features of a Life Insurance Policy?

Before you invest in life insurance, you should understand the features of life insurance. Given below are some of the important life insurance features:

  • Premium Payment

    • Premium is one of the key features of life insurance. It is the amount you need to pay the insurance company to buy a life insurance plan. You can either make a lump sum payment or opt for flexible payments. It can be monthly, quarterly, half-yearly, or yearly. The factors determining the premium are the sum assured, tenure, riders, and other aspects mentioned in the plan you propose to buy.

  • Policy Term

    • The policy term is the duration for which the insurer provides the life cover, and the life insurance plan is active. You should choose a term that aligns with your long-term financial goals. Investing early in life gives you the advantage of a longer-term for an affordable premium.

  • Tax Benefits

    • One of the important features of life insurance and must-note benefits of Life Insurance are the tax benefits. These ultimately reduce your income tax burden. You get tax benefits on life insurance under various sections of the Income Tax Act 1961*. They are:

    Section 80C: The premiums paid for life insurance policies of self, spouse, and children are eligible for deduction from your taxable income up to ₹ 1.50 lacs under section 80C

    Section 10(10D): The insurance payouts you receive are exempt under Section 10(10D) subject to conditions under the Income Tax Act 1961.

    Section 80CCC: The premiums paid towards retirement/pension policies are eligible for tax benefits under Section 80CCC.

  • Claim settlement ratio

    • Claim settlement ratio is one of the crucial characteristics of life insurance. It is the procedure involved in providing the death benefit to the nominee on the untimely death of the policyholder. A seamless settlement provides timely financial support for the family. While purchasing the life insurance plan you should ensure that the insurer you choose has a claim settlement record of over 90% as per the IRDA report.

  • Nominee

    • A nominee is the person who receives the sum assured as specified in the insurance policy on the untimely demise of the policyholder. If you’re wondering what is a nominee in insurance, it refers to the individual you designate—such as your parents, spouse, or children—to receive the proceeds. Insurance companies also provide the option to change/ update the nominee any number of times during the policy term.

Benefits of Buying a Life Insurance Policy

The features of life insurance are one aspect to consider before buying a policy. The benefits of a life insurance policy are equally important. Benefits life insurance is available with the following benefits:

  • Financial Security

    • The main purpose of investing in a life insurance plan is to provide financial security for your family. In case of any eventuality, the insurer will pay the nominee/beneficiary a predetermined amount. The payout can be utilised to fulfil long-term goals, pay off debts, manage monthly expenses, etc. Term life insurance is a type of life insurance which provides a lump-sum live cover amount to the nominee in case something unfortunate happens to the policy holder

  • Investment Feature

    • This feature of life insurance is available in plans like ULIPs (Unit Linked Insurance Plans). Opt for this plan If you require both protection and savings in life insurance. A part of the premium paid provides life cover, and the remaining is invested in market-linked assets of your choice that help your money grow and create wealth for your future goals.

  • Add-on Benefits

    • The treatment for critical illnesses like heart disease, renal failure, stroke, etc, can dig a hole in your pocket. If you need comprehensive life insurance, you opt for add-on benefits. Riders provide coverage for life-threatening diseases specified in the policy, permanent/partial disability, accidental death benefits, etc., and enhance the scope of the policy.

  • Secure Retirement

    • To have a peaceful retired life, you should be financially independent. Investing in a life insurance plan provides financial security for your family in your absence, as well as helps create a corpus for your retired life. Retirement plans are life insurance policy types that provide long-term financial stability for a stress-free retired life.

Importance of Having a Life Insurance Policy

The following explains the importance of having a life insurance policy:

  • Financial Protection For Your Family

    • Financial protection is one of the features of life insurance that will take care of your family’s needs in your absence. A life insurance plan with maximum life insurance coverage benefits can take care of their essential and emergency needs and compensate for the loss of income. Plans like whole life insurance provide life cover even up to 99 years. The death benefit from these plans will take care of your family’s financial future.

  • Income Replacement

    • Income replacement is crucial for your family to manage recurring expenses, provide for children’s education, etc., in the event of your early demise. This is one of the major features of life insurance. The life insurance plan provides death benefits to the nominee in the form of regular income by way of monthly payouts. Some types of life insurance allow customisation of death benefits. A portion of the payout is in lump sum and a regular income stream is created with the remaining.

  • Debt Settlement

    • The sudden demise of the policyholder can disrupt the finances of a family. Even more, if you leave behind huge debts like mortgage loans, car loans, credit card dues, etc. The lump sum payout from a life insurance policy will enable them to pay off the debts and ease the financial burden.

  • Achieving Financial Goal

    • The life insurance savings component creates wealth for achieving financial goals. Plans like ULIPs have both insurance and savings components. By purchasing these plans, you can fulfil both long-term and short-term goals like children’s education, owning your dream home, buying a car, creating a retirement corpus, etc.

  • Retirement Planning

    • The features of life insurance include retirement planning. Some specific plans, like pension plans, are ideal for retirement planning. Invest in these plans during your career days to be financially stable and have a worry-free retirement.

  • Riders

    • Riders are also among the life insurance policy features that customise the plans with add-on benefits like converge for terminal illnesses like cancer, heart disease, stroke, permanent/partial disability, or accidental death benefits.

Conclusion

Life insurance is an essential financial tool that secures your family’s financial future. The varied features of life insurance like flexibility in premium payments, seamless claim settlements, add-on benefits, etc., can provide financial stability to your loved ones. A life insurance plan empowers your family to be self-reliant and financially independent even in your absence. A life cover bought early proves economical as the premium increases with age.

However, to achieve the purpose of the investment, life insurance policy management by upgrading the plan at various stages and regular premium payments is vital.

FAQs on Features of Life Insurance

Q. What are the four features of insurance?

A. The four features of life insurance policy are premium payment, policy term, claim settlement, and tax benefits.

Q. Can I purchase life insurance riders without buying a base policy?

A. No. You cannot purchase life insurance riders without buying a base policy. Riders are add-on benefits and among the life insurance features that enhance the coverage of the policy.

Q. How many riders can I add to my life insurance policy?

A. There is no restriction on the number of riders provided they are available in the base policy. The riders vary with the types of life insurance policies. 

Q. How to make the insurance claim?

A. To make the insurance claim, the claimant should submit a written intimation with basic details like policy number, name of the insured, date of death, place of death, cause of death, and name of the claimant for the insurance company to initiate the claim process. Subsequently, the claimant should have the claim form, death certificate, policy document, deeds of assignment/reassignment, legal evidence of title if the nomination is not done, and executed and witnessed discharge form. If the information and the documents submitted are accurate, the insurance company will process the claim.

Q. What is the primary feature of a life insurance policy?

A. The features of life insurance policy are varied. The primary feature is premium payment. Premium is the amount paid to purchase the plan. The premium can be a single payment or multiple payments made every month, every quarter, every half year, or every year. It depends on the tenure, sum assured, and the add-on benefits.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Disclaimer

*Tax benefits are subject to conditions under Sections 80C, & Section 10(10D) and other provisions of the Income Tax Act, 1961. Tax Laws are subject to change from time to time.

#Provided we have received all the relevant and required documents and no further investigation is required. Claim settlement process would be completed within stipulated timelines once the claim request is approved.

***Online Premium for Life Option, Male Life Assured, Non-Smoker, 20 years of age, Policy term of 25 years, Regular pay, Annual frequency, exclusive of taxes and levies as applicable. (Annualized Premium of 622/30=20.7).

In unit linked policies, the investment risk in the investment portfolio is borne by the policyholder. The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender/withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year.

Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. The name of the company, name of the brand and name of the contract does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your insurance agent or the intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.

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