Life Insurance, Health Insurance and Annuity Plans

What is life insurance?

Life insurance is a financial cover for unforeseen events related to human life. It is a legally binding agreement between you and the insurance provider. In this contract, you undertake to pay a specified premium for a fixed period in exchange for life coverage. The insurer, in turn, agrees to provide monetary benefits to your beneficiaries if any of the unfortunate incidents covered under the agreement occurs. Such benefits are demarcated in the contract terms, called the policy document. 

Kotak Life offers a range of life insurance products that satisfy a range of insurance needs. From pure life protection of a Term Insurance Plans to the dual benefits of insurance and investment in Savings Plans, you can choose from a range of life insurance products from Kotak Life to ensure that your family is well taken care of, even in your absence.

Thus, a life insurance policy ensures that the loss of your income does not hamper your family’s financial standing. You can use savings-based life insurance products as investment tools to create wealth and fund long-term financial goals. Many such products can also act as a secondary source of income. Tax savings on the premiums paid is another perquisite of buying such insurance policies. 

Some important features of life insurance that everyone must know

There are different types of riders in insurance. Some of the popular ones include:

• Life insurance cover: The monetary sum that can substitute the loss of future income. 
• Sum assured: The amount that the insurer guarantees to pay in the event of a loss.
• Maturity benefits: The lump sum paid at the end of the policy term in traditional and market-linked life insurance policies. 
• Policy term: The duration for which the life cover stays in place. The insurer pays the benefit if any loss occurs during this time. 
• Premium payment term: The period for which you have to pay the premium for your life cover. 
• Premium payment frequency: The interval at which you have to pay the premium, e.g. monthly, quarterly, half-yearly or annually.
• Fixed premium:The premium amount as determined at the time of purchase. It remains fixed throughout the payment term.
• Surrender value:The amount payable on your exit from the policy before the maturity date but after the lock-in period. It is not applicable for term insurance.
• Cash value: The savings component of your investment insurance that accumulates over time. Insurers invest a part of your investment insurance premium into conservative-yield ventures. The profits earned build the cash value. 
• Paid-up value: The reduced sum assured payable at maturity after premiums are paid beyond a defined period but not to full term.
  Paid-up Value = (Number of Premiums Paid / Total number of Premiums Payable) X Sum Assured
• Loan on policy:Borrowing against your traditional life insurance policy using the cash value as collateral. The insurer sanctions a percentage of the surrender value as loan.
• Multiple payout options:Choice of claim settlement through a lump sum or as regular payments.
• Mortality charge: The cost of insuring your life based on your age, gender, and prevalent life expectancy ratio.
• Loyalty additions: Financial rewards from the insurer in favour of staying invested for a long duration.
• Wealth boosters: Increments to your insurance benefits that the insurer pays with some policies.
• Bonus: Share of profits earned through investments made with the premium amount, passed on to investors as dividends. 
• Annuity/ Income: Monthly or yearly incomes offered in some investment insurance plans.
• Riders: Optional add-ons to your life coverage at nominal rates over the base premium. Examples include accidental death benefits, waiver of premium, critical illness cover etc.
• Accidental death benefit: Extra payout over the base sum assured in case of accidents.
• Waiver of premium: Rider that allows you to not pay future premiums following any permanent disability or after the death of the guardian paying for a minor’s insurance cover. The insurer bears the premiums, and the life insurance cover continues throughout the policy term.
• Critical illness cover: The option to obtain payouts on the first detection of medical conditions listed under the scope of the rider.

What are the types of life insurance offered by Kotak Life?

• Protection plans 
• Term insurance

These are pure risk protection plans that pay a pre-defined sum to your beneficiary if an unfortunate event occurs during the policy tenure.

Kotak Life Insurance offers the convenience of buying such term plans online. Life coverage starts at less than Rs.23 per day* and multiple payout options from lump sum to regular income suit every family’s needs. You can also add to your coverage or reduce it at different stages of your life.

• Savings and investment plans
• Child plans Kotak Life offers life insurance for children that help build an adequate corpus for their future. 
• Retirement plans Kotak Life’s pension plans ensure financial independence even after you cease working for wages. You can assemble comprehensive retirement funds through guaranteed additions and bonuses during your peak working years. After retirement, you can instate that capital into annuity funds and enjoy a regular income.
• Whole life insurance Such plans offer risk protection throughout your life. Kotak Life offers policies with 99 years as the maximum age of entry. These policies can provide for your spouse’s old age needs. 
• Endowment plans Such plans combine risk cover with investment. The life cover protects your family from financial distress. Moreover, if you survive the policy tenure, you get your outlay back along with returns and bonuses, reaping profits. 

Kotak Life offers different types of savings and investment life insurance plans: 

• A) Unit-linked life insurance policies (ULIP) These savings schemes allow you to speculate in the capital market. You can choose the funds, debts, or equity, or a balanced combination of both types, according to your capacity for handling risks. The option to move your money among the various asset types protects your capital and helps you maximize your profits.
• B) Participating ‘with-profits’ plans Kotak Life shares parts of its surplus earnings with the investors through dividends on such policies. Thus, these plans ensure capital appreciation, along with life insurance.
• C) Non-participating non-linked plans – specified maturity proceeds, Kotak Life guarantees the investment benefit in such schemes.

Policies that fall under participating or non-participating categories can further be classified as follows:

• Money-back plans – receive parts of your sum assured at regular intervals throughout the policy period. The balance sum, or assembled bonuses, is disbursed at maturity.
• Income plans – Life offers alternative sources of earnings through policies that pay guaranteed monthly or yearly incomes. Some programs even increase the income year on year. Moreover, accrued bonuses paid at maturity augment your savings. 
• Guaranteed savings plans –  Life guarantees the benefits on such policies, providing certainty of returns.

Insurance riders

Kotak Life enables you to personalize the protection as per your individual needs through riders. Some examples of such riders include:

• Critical Illness cover
• Accidental Death Benefit 
• Waiver of Premium on permanent disability 

How does a life insurance policy work?

• What is life insurance: It is the pledge from your insurance provider to pay a specified amount to your beneficiary in case of an unfortunate incidence. In return, you pay a pre-decided premium to the insurance provider. Paying premiums on a regular basis or all at once at the time of purchase is essential to keep the policy in force.
• How the insurers decide the premium: Through the process of underwriting, the insurer assesses risks involved in insuring your life. They ensure that the cost of the life cover they propose matches the risk they face in providing the coverage. For this reason, they put forward a detailed questionnaire about your health status and your workplace conditions. You may have to undergo a medical examination as well. The insurers set the best life insurance premium for you accordingly. Also, life risks amplify with age and premiums cost more when your age increases.
• When to pay the premium: You can opt to pay the premium upfront when you buy life insurance. You can also pay on a monthly, yearly, half-yearly, or quarterly basis depending on the terms of your policy. 
• How your beneficiary receives the benefits: If an unwanted event happens, your nominated recipient must file a claim with a duly filled intimation form and the original policy document. The insurance company verifies the claim validity in line with the policy terms. If everything is in order, the insurer releases the stipulated payout.
• When insurers can reject claims: Suppressed or false information in the application form or a lapsed policy can be causes for refusal. 
• How term insurance works: The life cover lasts for the period defined at purchase. Your nominee receives the sum stated in the policy when you meet an untoward outcome. There is no cash value, and if you survive the policy term, the insurer makes no payment. It is the most inexpensive form of life insurance providing sizeable life coverage at premiums that fit your budget.
• How traditional life insurance works: The sum assured is defined at inception. However, such policies acquire a cash value with time since a part of the premium earns interest, and the insurer shares the profit with you. You can access this amount as regular incomes during the policy period or let it accumulate up to maturity. If an unwanted event occurs, your family received the death benefits.
• How unit-linked life insurance works: The sum assured is not fixed. The insurer invests your premium in the capital market. You can choose the funds where your money goes based on your risk appetite, and market performance decides the final yields. Thus, such life insurance plans present the potential for substantial profits. Moreover, your nominee receives a payout in case of an untimely loss.

How to choose the perfect life insurance policy and coverage for you?

• Work out the coverage type best suitable for you.Before buying, it is vital to determine the goals that you plan to achieve through this financial tool. Once you identify the needs, it will be simpler to choose the best life insurance policy that covers the essential aspects. 
• If you need coverage that generates liquidity, you can consider an investment insurance policy that acquires surrender value. You can take loans or partially withdraw funds from it.
• A money-back plan may work well for you if you have specific time frames for your short-term life goals.
• An income plan can act as a source of income after your regular wages stop.
• Those who are in the lookout for quick profits and do not have hefty financial liabilities can invest in market-linked insurance.
• If you wish to protect your retirement corpus and make decent profits, you can buy non-participating policies with guaranteed returns.
• In case your primary goal involves protecting your family from financial duress, term insurance can be the best life insurance plans for you.
• Determine how long you need life protection.

The duration for which your family will need financial assistance should be your ideal policy term. For example:

• You may need insurance for a defined period, for instance, until the time your children acquire financial independence or for the duration of your home loan. In this case, term insurance would be appropriate.
• Otherwise, if you have to provide for financial dependents up to an advanced age, you can consider whole life insurance. It can act as a source of income for your spouse.
• For pension planning, you can count the number of years until your retirement and select a limited premium payment term accordingly.  
• Calculate your ideal sum assured.

You can estimate this value through the following steps:

• Review your family’s current living costs
• Gauge how long your dependents may require income replacement
• Multiply the two values
• Add your outstanding debts, e.g. house mortgage, car loans, existing student loans, credit card dues, etc. to the product
• Include the expected expenses for your children’s education or other long-term expenditure you can foresee.
• Deduct the value of your existing investments

You will arrive at a ballpark figure for the coverage you need.

Do keep in mind that inflation may erode your money’s worth. Nevertheless, insurance plans with investment elements, especially policies linked to the capital market can deliver inflation-beating revenues. Another economical option is to opt for term insurance that offers the flexibility to upgrade the life cover with changing circumstances.

• Select according to your budget.

The cost of the coverage is another vital consideration that affects your policy choice. You can research online for the best life insurance quotes.

• Customize your coverage with riders.

For a nominal cost, you can club with your basic sum assured extra coverage against financial exigencies. For example, if you work in a high-risk profession, an accidental death benefit can be useful. It will provide extra payouts to your family if you meet an accident. Likewise, if you have a family history of critical ailments, you can buy a critical illness rider. It offers payouts if you contract a life-threatening health condition covered under the plan.  

• Consult a life insurance advisor.

An expert can help you analyze the potential worth of your preferred policies and guide you towards the best life insurance policy for your needs. Reputed insurance companies offer the assistance of in-house advisors. You can discuss your requirements with them before making the final selection. 

What are the Documents Required to Buy Life Insurance?

• Admission of age
• Driving License
• Birth certificate
• School leaving certificate
• Passport
• PAN card
• Driving license
• Aadhaar Card 
• Photo ID Proof
• Passport
• PAN card
• Driving license
• Election Photo Identity Card (EPIC)
• Aadhaar Card
• Residence proof
• Passport
• Driving License
• Aadhaar Card
• Voter ID
• Updated bank account statement/ passbook
• Utility bills of electricity, gas, or telephone
• Ration card
• Rental agreement
• Income documents
• Latest salary slips
• Current Form 16
• Previous 3 years’ Income Tax Returns
• Audited profit/loss statements
• Employer’s certificate
• Last 6 months’ bank statement
• Passport-sized photographs
• Medical records 
• As specified by the insurer 

How to buy the perfect life insurance policies for you?

• Calculate the premium: After you decide on the life insurance cover you need, use online premium calculators to compute the required premium. Compare policies and select the one that offers adequate coverage at an affordable premium.
• Analyze the benefits: for the following
• any guarantee on the returns
• financial rewards like loyalty additions or assured wealth boosts
• the flexibility of investment, e.g. fund switch, increase in coverage
• associated charges
• availability of loans or partial withdrawal options
• Check the provider’s credibility: Ensure that the insurance company has a claim settlement ratio as the proof of reliability. Also, a high solvency ratio indicates sufficient cash flow for honouring claims. These checks will ascertain hassle-free claim settlement.
• Fill up the proposal form: After you pick the best life insurance plan for your needs, fill up the application form. Mention relevant details about your age, health, personal habits, and profession. Take care not to conceal any vital fact or furnish false information to avoid claim rejections later.
• Select a convenient premium payment option and term: Consider your finances before making long-term financial commitments. Single premium and limited pay options can work well for individuals with fluctuating incomes. With a regular payment scheme, select the frequency that best matches your flow of funds.
• Name a nominee: Specify the person whom you intend to benefit with the proceeds from your life insurance to avoid future disputes.
• Buy insurance online: You can avoid delays and elaborate paperwork through online purchases.
• Utilize the free-look period: Go through the policy documents carefully and understand the exclusions. You can return the policy within this phase if you find the stipulations do not align with your requirements.

What are the benefits of buying life insurance policies?

• Life coverage Life insurance shields your loved ones against financial exigencies when your income can no longer support them. 
• Tax savings A valuable aspect of life insurance of India is that it entitles you to deductions against premiums paid under Section 80C of the Income Tax Act, 1961. Such rebates reduce your taxable income, enabling you to save on taxes. The returns are also tax-exempt subject to the provisions of Section 10(10D). 
• Wealth creation Life insurance plans with investment features help you stockpile funds for your long-term financial goals, e.g. child’s education.
• Emergency funds through loans You can avail of low-interest loans against your traditional endowment policy and access funds at short notice.
• Extra perks Additional life cover in accidents and waiver or premiums in permanent disabilities are the added benefits of life insurance riders. 
• Retirement planning You can park your savings in life insurance and ensure consistent income after retirement.
• Infirmity protection You can add critical illness riders with your life insurance policy and arrange long-term healthcare funds for dangerous diseases. 

FAQs

• Is it necessary to buy life insurance?

  If you have financial dependents and liabilities, it is crucial to buy life insurance. In case of an unwanted upshot, your loved ones can suffer from a lack of adequate funds. Besides, if you have loans, your family can lose the asset if they default on the repayment. Thus, to protect your family from unpleasant circumstances, you can buy life insurance online from reputed insurers.

• How does life insurance work?

  You procure life insurance in exchange for a payment known as premium. Parts of the premium provide the administrative charges of the insurer and the life coverage costs. In savings plans, the insurer invests another part into profit-making schemes. This portion earns revenues, which the insurer passes on to you as benefits.

• Who can buy a life insurance policy?

  If you are a wage earner and have relatives to sustain, you can buy life insurance for the family. Even homemakers need life insurance because their contribution has an economic value. Children need it as well to avoid risks on their future income potential. Retirees can also invest in pension plans as an alternative source of income. Thus, anyone can buy a life insurance policy. The age bracket for purchasing life insurance in India is usually between 18 and 65 years. You can check the criteria like minimum and maximum age of entry on your insurer’s website. 

• What is the ideal life cover that I need?

  Several factors govern the ideal amount for your life coverage:

  • The number of your financial dependents
  • The kind of lifestyle you want to ensure for them and the money necessary for meeting such living costs
  • The amount needed to cover your children’s expenses and your existing loans
  • Your current age and annual income
  • The premium you can afford
  • Your investment goals

  You can take the help of experienced life advisors to identify the best life insurance cover in keeping with your needs.

• What is the right age to buy a life insurance plan?

  The moment you acquire the responsibility for the financial wellbeing of your retired parents, spouse, or children, becomes the correct time for buying life insurance. Even if you have just started to earn, you need to assemble funds for future goals and old age expenses. Life insurance costs increase with age. Thus, delaying the purchase of a life insurance policy will raise the premium you have to pay. However, the amount remains fixed throughout the policy tenure. Therefore, buying early will help you save on the premium outgo. 

• How to pay the premium for my life insurance?

  Online life insurance payment channels:

  • NEFT through your bank’s net banking platform
  • Payment from your insurance company’s website with approved credit or debit cards 
  • Internet banking
  • Electronic bill payment services of your bank  
  • Bill Desk
  • Mobile Immediate Payment Service (IMPS) with MMID

  Offline avenues

  • Cheque drop boxes at selected ATMs
  • Cash/ cheque/demand draft/ credit card payment at your insurance provider’s branch offices 

  Electronic fund transfer

  • Standing instruction to debit your bank account automatically
  • Direct debit from your bank account through Electronic Clearance Service (ECS)  

• What will happen to my life insurance policy if I cancel it?

  • If it is a plan with cash value, you will receive the surrender value provided the policy has completed the lock-in period. You can obtain the surrender value of your policy from your insurance provider.
  • Your life cover will cease to exist, and your family will no longer receive the benefits of life insurance if anything regrettable happens.
  • If you cancel your policy during the free-look period, you will get a refund of your premium minus the stamp duty and medical expenses incurred by your insurer. 

• How do I choose a nominee?

  You can appoint as your nominee anyone you want to benefit from the life insurance funds. The general practice is to assign your close relatives like children, spouse, or parents. But, to secure your family’s finances, you need to evaluate the accountability of the person you choose. You can select multiple beneficiaries as well.  

  Moreover, if you want to nominate children below age 18, you have to appoint a custodian. The appointee will receive the payout unless the minor attains adulthood. 

  However, nominating an unrelated person who will not suffer any hardship from the loss of your income can be hazardous. Thus, insurance companies may refuse such a nominee. 

• Can I change the beneficiary/nominee for my life insurance policy?

  You can change the nominee for your active life insurance policy any time during your policy term. Multiple nomination changes are permissible, and the latest nominee supersedes the previous ones. You can fill up the relevant amendment form mentioning the details of your new nominee and submit it to the insurer. The forms are available on the insurance provider’s website and branch offices. 

• How will my family receive the life insurance claim?

  Filing a claim is a straightforward process and involves the following steps:

  • Filling up the claim form online or at a branch office of the insurance company
  • Submitting a copy of the death certificate and the original policy bond
  • Furnishing documents like hospital certificate, police FIR report, postmortem report, discharge summary and other medical records in case of an accidental death 
  • Furnishing KYC papers of the legal heir like the succession certificate in the absence of a nominee

  The insurer will scrutinize the documents and verify the validity of the claim. Once satisfied, they will settle the payment. Your family will receive the benefits as a lump sum, a fixed, or increasing incomes as stated in the policy.

• Why should I buy a life insurance policy?

  Reasons for buying life insurance include:

  • Protecting your loved ones from the financial losses resulting from an eventuality
  • Shielding your family from the challenges of repaying your due credits
  • Financing your children’s higher education and other long-term goals 
  • Securing a constant income after retirement
  • Saving tax
  • Increasing your monetary assets through disciplined savings and judicious investments

• What are the tax benefits available with life insurance?

  You can avail deductions up to ₹1.5 lakhs per financial year for your life insurance premiums, under Section 80C of the Income Tax Act, 1961. However, if your policy was issued before March 31, 2012, you can apply for such deductions when the total premium does not exceed 20% of the sum assured. For policies issued later, the total premium must not surpass 10% of the sum assured to be eligible for deductions.

  Moreover, Section 10(10D) makes the maturity benefit tax-free if the total premium amount does not go beyond 10% of the sum assured. Besides, the death benefit paid to the nominee is exempt from taxes.