What is life insurance?


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 AssuredLoan 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 plansChild 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 coverAccidental Death Benefit Waiver of Premium on permanent disability