19 Life Insurance FAQs Answered

Life Insurance FAQs - BimaBandhu

Q1. How is average life insurance payout calculated? 

The computation of payouts is also based on factors like total premiums paid, your age, gender, and terms of the purchased life insurance policy. You can ask your insurer to know more about such intrinsic details. 

Q2. Who is eligible to claim life insurance benefits after the insured’s death? 

The chosen nominee or legal heir will get the benefits defined under a life insurance policy after the death of the insured individual.  

Q3. Does the nominee get any benefit in case the insured commits suicide? 

In general, such instances are not covered under any life insurance policy and thus, fall under the exclusions. It would help if you ask an insurance company about such details before buying any policy.  

A life insurance plan’s cash value is the amount that a policyholder will receive in case he/she cancels the policy. It also requires them to surrender the policy benefits to receive the cash value. 

Q5. What is paid-up value in life insurance? 

It refers to the reduced sum assured after the insured fails to pay the life insurance policy premium timely, causing policy lapse.  

Q6. What is surrender value of a life insurance plan? 

It is the amount that you, as a policyholder, will receive in case you voluntarily terminate your policy before the maturity date. 

Q7. Is it mandatory to add critical illness cover to a life insurance policy? 

Opting for critical illness coverage under a life insurance plan does provide enhanced coverage. However, it is up to you to decide if you want to select this add-on at the time of buying the base policy. 

Q8. How can I revive a lapsed life insurance policy? 

 In case your policy lapses on account of failing to pay the premium on time, you need to submit valid proof for the delay that has happened and pay the premium along with a penalty. You are advised to read the revival clause of your policy to get a clear idea.  

Q9. Is life insurance different from general insurance? 

Life insurance provides coverage for human life, whereas general insurance caters to prized possessions, such as your home, car, or two-wheeler vehicles.  

An individual who receives the benefits of a life insurance policy in case the primary beneficiary is not alive, unable to receive the benefits, or refuses to do so is known as a contingent beneficiary.  

Q11. How should I decide on the amount of life insurance cover I need? 

Ideally, the life cover you select under a life insurance policy should depend on your income, standard of living, life goals, or current lifestyle. You can also use a life insurance calculator to make the right decision.  

Q12. Do I get several options to pay life insurance premium? 

You can pay the policy premium either annually, quarterly, monthly, or half-yearly. Select any of these options, whichever is most suitable to you.  

Q13. What will happen if I do not pay the premium of my life insurance plan? 

Failing to pay the premium on time leads to policy lapse, making you lose all its benefits. You cannot file a claim for a lapsed policy. 

Q13. What happens after the maturity of a life insurance policy? 

When your life insurance plan will mature, you will receive an accumulated amount (if any), depending on the type of policy you have purchased and its terms/conditions.  

Q14. Does the nominee need to pay any tax on the death benefits? 

The nominee of your life insurance policy does not need to pay any tax on its death payouts, which is tax-free.  

Q15. What is a base life insurance policy? 

It refers to the contract between the insured individual and the insurance company. In case of the insured’s unexpected demise, the nominee receives a death benefit provided the premiums are paid on time. A base policy excludes any add-ons that might be chosen by the insured.  

Q16. What is the maximum life cover amount I can choose for my family? 

Every insurer sets different sum assured limits for different life insurance policies. You can check the maximum sum assured you can select online using a life insurance premium calculator.  

Q17. After how many days do the nominee receives life insurance money post the insured’s death? 

In general, a death claim is processed and settled in 10-15 days after submission of all the documents and claim form by the claimant.  

Q18. What will happen if I outlive the chosen policy period? 

You will not get any benefit on surviving the policy tenure if you purchase a pure term plan. However, there are some other types of policies that provide maturity benefits as well.  

You May Also Like to Know About: What is a Term Plan?

Q19. What will happen if a nominee dies before the insured? 

In case a nominee dies before the life insured individual, he/she needs to add a new nominee to the policy.

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