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Why do u need a life insurance

Mr. Mehta was very happy with his job, his family and life in general. He was very
particular with his finances. His 8 year old daughter and 9 year old son were
doing well in one of the best schools in India and his wife had the financial
comfort she wanted. However, Mr. Mehta will concur that one can never tell
when fate will tarnish a pretty picture. He suddenly suffered a heart attack, with a
few complications, and was admitted to the hospital. Three weeks in the ICU and
an angiography and angioplasty struck him with a serious financial blow. His
modest medical insurance covered some of his expenses but he had to dip into
his savings for the rest. He thought his current financial plan was solid, but he
was wrong. What if the next time his medical expenses are even higher? What
about the money he has to keep aside for his daughters wedding, or his sons
higher studies? What if he doesnt pull through the next time? Who will take care
of his family and support them financially? Another disaster like this will destroy
his long term savings plans.
That was it! He had to re-assess his financial structure. Statistics showed him
that if he saved a little money every month in a life insurance policy he would be
in an even better position to deal with any unforeseen setbacks in the future. His
family will have financial security if he isnt lucky enough to survive the next time.
He also decided to take into consideration the expenses for his childrens higher
studies and marriage. Mr. Mehta was thinking very clearly in the long term now.
Although we dont want to think of these situations, preparing for them with the
right financial planning will only help our long term goals. Mr. Mehta realised this
the hard way. Luckily, we have the chance to learn from his mistake and better
prepare ourselves from now for an uncertain future.

Types of insurance
When Mr. Mehta decided to get life insurance to protect himself and his family he
had to be sure he was choosing the right policy. He had to buy a life insurance
policy that caters to his needs, as well as his sons education needs and his
daughter's marriage expenses. He was clear about that. These decisions could
not be taken lightly anymore. When he was faced with his own mortality it gave
him the push he needed to save wisely and save for the future. His life insurance
company helped him derive a formula that best suited his requirements and the
requirements he has for his children. The various policies he could choose from
are listed below:
Term Insurance

This type of policy is a contract between the insured and the life insurance
company to pay the persons s/he has given entitlement to receive the money, in
the case of his/her death, after a certain period of time. The policies can be taken
for 5, 10, 15, 20 or 30 years.
Endowment
In an endowment policy, periodic premiums are received by the insured person
and a lump sum is received either on the death of the insured or once the policy
period expires.
Money Back
This policy offers the payment of partial survival benefits (money back), as is
determined in the insurance contract, while the insured is still alive. In case the
insured dies during the period of the policy, the beneficiary gets the full sum
insured without the deduction of the money back amount given so far.
Group Life Insurance
This is when a group of people have been named under a single Life insurance
policy. It is popular for an employer or a company to add employees under the
same policy. Each member of the group has a certificate as legal evidence of
insurance.
Unit Linked Insurance
ULIPs (Unit Linked Insurance Plan) offer the insured the double benefit of
protection from risk and investment opportunities. ULIPs are linked to the market
where the insureds money is invested to help earn additional monetary benefits.

Accident
An accident is an unforeseen event or occurrence causing damage or injury to a
person
Age Limit
It is the stipulated minimum and maximum ages below and above which the
company will not accept applications or may not renew insurance policies.
Agent
An insurance company representative who sells and services life insurance
contracts for the insurer; He is an intermediary between the insurer and the
policyholder
Annuity Plan
An insurance contract that provides for an income for a specified period of time,
such as a number of years or for life
Application/Proposal Form
This is to be filled by the insurance companys agent and sometimes a medical
examiner including information given by the proposer. In addition, it has to be
signed by the proposer. It is one of the primary steps to get an insurance policy.

Assignment
An assignment is a legal transfer where a policyholder can transfer his interest to
another. It can be made by an endorsement on the policy document or by a
separate deed. Assignment can be either Conditional or Absolute.
Beneficiary
The beneficiary is the person or entity, named in the policy as the recipient of the
life insurance benefit in the event of policyholder's death.
Coverage
The amount of protection that the policyholder will receive based on the terms of
the policy.
Exclusions
These are stipulated in a policy as what will not fall under the insurance policy
and hence will not provide benefit to the insured or beneficiaries.
Fiduciary
A fiduciary is a person who has been legally trusted by a beneficiary. For
example, if abeneficiary legally documents that someone will act on his behalf
when required.
Grace Period
Policy holders are expected to pay their premium on time. However, a certain
additional period is given to the insured. During this additional period, or grace
period, the policyholder is allowed to pay the premium without any interest.
Therefore it is a specified period after a premium payment is due, in which the
policyholder may make such payment, and during which the protection cover of
the policy normally continues.
Insurable Interest
This means that the insured, or the beneficiary who receives the policy benefits,
must necessarily suffer an emotional or financial loss if an unforeseen or
untouched event occurs. Without insurable interest an insurance contract stands
invalid.
Insurability
Insurability means all conditions that affect the health, susceptibility to injury and
life expectancy of an insured.
Insurance
It is to indemnify the insured, or beneficiary on the death of the insured, as
protection against unforeseen circumstances. (A system under which individuals,
businesses, and other entities, in exchange for a monetary payment (a premium),
are guaranteed compensation for losses resulting from certain perils under
specified conditions.)
Insured
The insured is the person who is covered in the insurance policy.
Lapsed Policy
A policy which has been terminated for non-payment of premiums. A policy
lapses usually when the premium due is not paid even after the grace period.

Maturity Date
The maturity date is the date when the amount paid towards the life insurance
policy is given to the policy holder once the term of the policy ends.
Maturity Claim
The amount given to the insured at the end of the maturity period is called the
maturityclaim.
Moral Hazard
An insurance policy is based on the need for insurance, the health and personal
habits of the insured, the insureds standard of living and income. The moral
hazard is the decision of the insurance company to accept the risk and issue a
policy after taking the factors mentioned above into consideration.
Nomination
This is when the policy holder or insured officially authorises another person to
receive any monetary benefits of the policy. The authorised person is
the Nominee.
Premium
The amount paid by the insured, either in lump sum or in periodic amounts, to the
insurance company under the life insurance policy.
Reinstatement
Reinstatement of a policy is the act of putting a lapsed policy back into force,
after thegrace period has expired. The company may require evidence
of insurability and will always require the insured to pay the total amount of
overdue past premiums.
Surrender Value
The surrender value it the amount paid to an insured who wishes to terminate the
policy before its maturity date.
Vesting Age
The age at which the insured starts receiving a pension from the insurance
company in an insurance-cum-pension policy.
NOTE: The above definitions are only explanatory in nature. If any of the above
terms have been defined in the policy contract, then the policyholder should
consider the definition as specified under the policy contract.