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Advantages and Disadvantages of 1 Crore Life Insurance:

A Life insurance plan is one simple and purest form of life insurance plan. The life insurance plan is designed to provide financial cover to the family members in case of the death of the policyholder. The term insurance offers death protection by simply paying the specified premium sum for the specific policy term. The death benefit received by the nominee will help them to cover the financial needs in the coming times.

Advantages and Disadvantages of 1 Crore Life Insurance

Advantages of 1 Crore Life Insurance

Affordable Premiums

The most affordable product in the life insurance is the term insurance product which comes at cheaper premiums when compared with other life insurance products such as Annuity insurance, ULIPs etc. The main reason is that the premium paid in term life insurance policies goes into protection and there would not be any investment option. Having an investment option in the life insurance premium paid results in the increase of life insurance premium to be paid by the customer. The 1 crore term life insurance premium for a 25 year old person with no adverse health conditions and non smoker would be around Rs.20k for one year. While the other life insurance products charge anywhere between Rs.1 lac to Rs.3 lacs for the same sum assured to be provided. Other life insurance products have premium bifurcated for protection and investment. Investment needs to be made in substantial amount for the returns to be on the higher side when compared to the traditional market related products. 1 Crore term insurance plans can be compared online on the portal  and the best term insurance plan with 1 crore sum assured can be purchased online without any hassle of visiting insurance company office.

Death Benefit

Term life insurance products offer death benefit to the nominee of the policyholders in the event of death of the policyholder due to any unforeseen circumstances. The death benefit paid to the family members of the deceased would not be more than the sum assured mentioned under the policy terms and conditions. The death benefit is payable only once in a term life insurance policy after which the policy would cease to exist. Death benefit under the term life insurance policy would be paid after submission of all the required documents as mentioned by the insurance company. The death benefit paid to the nominee of the policyholder can be used to prevent the family of the deceased from a financial crunch after the death of the policyholder. The proceedings received from the death of the policyholder can be used to settle the family of the deceased. The biggest advantage of a term life insurance policy is the death benefit which would be provided after the untimely demise of the policyholder.

Maturity Benefit

Term life insurance products offer maturity benefit in which the policyholder would get a lumpsum amount at the time of maturity of the term insurance policy. There are certain term insurance plans in which the premium paid by the policyholder would be returned to the policyholder after the expiry of the term insurance policy. The money back term life insurance plan is one of the life insurance plan in which the policyholder would get the premiums paid during the policy period at the end of the policy period. The premiums paid would be returned in addition to the accrued bonus (if any) at the maturity of the term life insurance policy. Maturity benefit would be paid to the policyholder in this case as the policyholder would be alive at the time of maturity of the policy. It is important to note that only the premiums paid by the customer would be returned to the policyholder at the maturity of the policy, the premiums paid by the policyholder during the policy period will not be invested anywhere to generate returns unlike the ULIP policies.

Return of premiums

Another advantage of a term life insurance policy is that the premiums paid by the customer would be returned back to the policyholder in certain types of term insurance policies such as Return of premium policies. The premiums would be returned to the policyholder at the end of the policy period or during certain events of life such as Marriage, Childbirth, Purchase of house, Child education, etc. The return of premiums would be done based on the formula prescribed by the insurance company and agreed by the policyholder. The return of premiums term life insurance policy can be purchased online from the portal by entering basic details such as Age, Annual income, gender, and other details of the customer.

Loan Availability

Another advantage of life insurance policies is that these policies provide loan to the policyholders during certain stages of life such as Marriage, Child education etc. Availing loan against the life insurance policy these days is the best option to meet all your emergency expenses. The process of availing loan from the life insurance policy is hassle-free when compared to other traditional loan types. The first and foremost thing to consider before thinking of taking loan from life insurance policy is to confirm whether the policy qualifies for loan or not. A loan can be taken against the life insurance surrender value of permanent or whole life insurance. Unlike other plans term insurance do not contain the cash value and they expire at the end of the term without earning returns. Insurance companies allow the policyholders to take loan if the life insurance policy of the policyholder had paid premiums for at least 3 consecutive years on time. The advantage of availing loan from a life insurance policy is that you are borrowing the money from yourself as the loan is paid from the premiums paid by you over a period of time. The credit worthiness of the customer is considered at the time of giving the loan as it is important for the insurance company to check the loan repayment capacity of the customer before sanctioning the loan.

The loan amount that can be availed by the policyholder under the life insurance policy can go up to 90% of the accumulated premiums paid during the policy period. The interest rate charged in case of loan against an insurance policy is based on the premiums already paid and the number of premiums that have been paid. The more the premium amount and the number of premiums paid, the lower rate of interest would be charged from the policyholder. The policyholder cannot avail loan against the policy immediately after purchasing the policy, a waiting period of 3 years is required to avail loan under the life insurance policy. After taking the loan the policyholder should continue paying the premiums under the life insurance policy and failing to do so can result in termination of the insurance policy by the insurance company.

The loan should be repaid during the term of the policy. The policyholder has the option of either paying back the principal along with the interest or only the interest amount. If the policyholder only pays the interest amount, then the principal amount due will be deducted from the claim amount at the time of claim settlement. In addition to this, if the policyholder chooses to pay only interest during the policy period and if he/she dies during the loan term, then only the remaining sum assured will be paid to the nominee of the policyholder.

Add-ons/ Riders

Add-ons or riders are the extra coverage available under the life insurance policy to the policyholder on payment of additional premium. There are certain add-ons available under the life insurance policy such as Critical illness, Waiver of premium due to accidental disability or Critical illness, Disability cover etc. The riders under the life insurance policy are intended to provide extra coverage to the policyholder. For instance the critical illness rider provides claim in the vent of policyholder contracting critical illness such as Cancer, Heart diseases. The major advantage of 1crore life insurance policy is the availability of Disability cover for the same sum assured under the same life insurance policy. The add-ons or riders in the life insurance policy are affordable and the premium to be paid for these would be a percentage of the sum assured taken under the life insurance policy.

The insurance companies offer 3-4 riders depending on the type of life insurance policy and customer has the freedom to take all these riders under the life insurance policy. Once the riders are taken during the policy period the customer, the premiums has to be paid throughout the policy period. If the policyholder decides to stop paying the premiums for the riders, the same can be communicated to the insurance company and if the insurance company agrees the customer can stop availing the features of add-ons or riders.

Loan burden reduction

Life insurance policies can be taken if there is any outstanding loan of the customer. Life insurance policies can be taken to reduce the loan burden of the customer. For instance if you have taken a home insurance loan from XYZ bank and you want to reduce the loan burden on your family in case of your sudden demise, then you can take a life insurance policy with sum assured that of the loan availed. Almost all the Banks and NBFCs provide loan insurance to their policyholders to cover the burden of the loan instead of passing it on to the family of the insured. The loan insurance policies are nothing but the term insurance policies which are of two types; Decreasing sum assured term insurance policy and Constant sum assured sum assured policy. In the former the sum assured decreases with each passing month as the loan amount would be decreasing with each instalment. Under these policies the claim amount that would be paid would be the outstanding loan at the time of death of the policyholder.

The loan burden of the customers can be passed on to the insurance company by taking a life insurance policy which will pay the outstanding loan and clear the burden of the family members of the deceased. The premium to be paid under these kinds of policies is also less compared to the traditional life insurance policies as the sum assured would keep decreasing with each passing instalment. For 1 crore sum assured the premium would be around 20-30% less than the traditional life insurance policies. For 1crore sum assured life insurance policies it is very important to have it to save the loan burden from falling on the family members of the deceased. The loan burden in these cases would be passed on to the insurance companies which would settle the loan amount directly to the Banks/NBFCs and then settle the remaining amount to the family of the deceased. The proceedings from life insurance policy can be used to settle any kind of loan availed by the policyholder. The best way to prevent your family from facing financial crunch and loan burden after your death is to purchase a life insurance policy which would be helpful in the event of death of the policyholder.

Pension/ Retirement planning

The other major advantage insurance of having a life policy is the pension or retirement planning that can be done with the help of life insurance policy. Life insurance policies can be taken to get a pension after retirement; these kinds of policies are known as Annuity policies. There are many annuity policies in the market which provide pensions to the policyholder after retirement. These policies can be taken by the customers who want to get regular pensions after their retirement. There are two types of annuity policies; deferred annuity or immediate annuity. The deferred annuity policy is where the pension would be paid to the policyholder after a period of time while the immediate annuity policies are those in which the pension would be paid to the policyholder immediately after purchase of the policy. A part of the premium paid under the life insurance policy would be invested in the market to generate returns and another part would be utilized to provide life insurance cover to the policyholder. The part of the premium that is invested in the market would be utilized to pay the pension to the policyholder.

The pension plans from life insurance companies are very helpful to the customers to get regular pension till a certain period of time or till the death of the policyholder. The pension would be paid for a certain period of time or till the death of the policyholder or to the spouse of the policyholder after the death of the policyholder. The option has to be selected by the customer at the time of purchasing the life insurance policy. There are other options such as increasing pension or decreasing pension or constant pension which can be availed from the insurance company as per the requirement of the policyholder.

Disadvantages of 1 Crore Life Insurance

Expensive for certain people

The major disadvantage of life insurance policy is the premium that has to be paid by the customers with certain conditions such as Old aged customers, adverse disease conditions etc. For instance old age people have to shell out more premiums when compared to younger people. The reason for this is that the life insurance premiums are calculated based on the age of the applicant. Higher the age of the applicant, higher would be the life insurance premium. This is due to the simple fact that the life insurance premium are based on the mortality ratio which increases with increase in age of the applicant. Higher the age, higher would be mortality ratio of a person. Higher mortality ratio means higher chances of claim for the insurance company. As the claim chance increases, the insurance company has to increase the premium to match the incoming and outgoing.

The other thing is that the customers with adverse health conditions such as history of heart ache, Cancer and other illness would be charged extra premium compared to people without any adverse condition. This disparity is due to the increase in mortality ratio in customers with such adverse health conditions. The chance of a person with adverse health condition expiring is more than the person with normal health condition. The premiums that are charged for people with adverse health conditions are higher when compared to the people with normal health conditions. The underwriters of the life insurance company decide on the sum assured to be provided and the premium to be charged for applicants with adverse health conditions. If the applicant is having a pre existing disease, then the premium may be loaded by the underwriter of the life insurance company in anticipation of the early claim. The duty of the underwriter is to make sure that sufficient premium is collected so that the claims can be paid in the future if and when they arise.

No guarantee of wealth

The major disadvantage of the 1 Crore life insurance policy is that the policy would not guarantee the creation of wealth. When compared to the traditional investments the wealth building in life insurance policy comes with limited guarantee. For example, the term life insurance policy provides only protection without any generation of wealth. There are other types of life insurance policies such as ULIPs and other market related policies which can be used to create the wealth but the returns are not guaranteed as the wealth generation depends on the market conditions.

If the market is performing well, the wealth generated would be sufficient to meet the short term and long term goals of the policyholder. If the market is not performing well then the wealth generated would not be sufficient to meet the long term and short term goals of the policyholder. Therefore it is important to keep in mind the guarantee of wealth generation before taking the 1 crore life insurance policy. Since a part of premium paid in the life insurance policy goes towards protection, the wealth generation would not be as expected with other traditional options in the market. 1 crore term insurance policy is intended to provide only protection during the policy period and the premium paid would be utilised for protection of the policyholder. In return of premium term life insurance policies also the premium paid only will be returned to the policyholder but the premium paid would not be invested to generate wealth.

Not better when compared to other mode of investments

The life insurance investment is not better when compared to the other mode of investments in the market. For instance the returns in mutual funds are way higher than that of the returns from insurance policies. The premium invested for 1 crore term insurance policy might be lower but if the same premium is invested in mutual funds or any other investment mode, then the returns would be way higher when compared to the life insurance policy. This is due to the fact that the term life insurance policy cannot generate any returns and only provides protection to the life of the policyholder from any unforeseen circumstances. If the 1crore term life insurance policy is taken only for the purpose of protection, then the premium paid by the customer can be justified otherwise the same premium which is paid by the customer can be invested elsewhere to generate returns. The returns from the investment can be used to help the family from facing financial crunch after the demise of the policyholder.

Lapsed policy means waste of premiums paid

Life insurance premiums are to be paid continuously every year/ month or as per the option chosen by the customer. If there is a break in between the payment of two instalments the life insurance policy would lapse after a period of 30 days from the payment due date. The frequency of premium payments can be monthly/ quarterly/ half yearly/ annually which can be selected by the customer at the time of purchasing the life insurance policy. If the customer misses the payment due date by any reason, the insurance company will give 30 days’ time to make the pending payment and the cover will be resumed as usual. This period is known as grace period which ranges from 15 days to a maximum of 30 days depending on the frequency mode of premium payment.

The policy which is lapsed will lose out all the benefits accrued till the time of lapse and the customer would be left without any cover. In the 1 crore life term insurance policy, if the payments are not made on time and the policy is lapsed then the customer would not be covered for any uncertainties until the lapsed policy is revived by the policyholder after paying the due premiums. In other forms of policy where the insurance company has specified the time period to pay the premium and if the policyholder fails to do so, then the insurance company would not guarantee the returns as promised and there are instances where the returns are less than the premiums paid. In other traditional market related investment products such as mutual funds there is no problem of maturity as the investment can be made and redeemed any time. The funds invested in the market would be available to withdraw at any point of time thus making it possible to at least get the invested amount if the policyholder is not able to continue with the investment due to any reason. In case of the life insurance policies, the premiums paid during the policy period would go waste if the policy is lapsed due to whatsoever reason.

Premium payment capability reduces with age

Life insurance policies are generally taken for a long period of time such as 25 years or 30 years. The premium payment capacity of a policyholder might increase or decrease with increase in age. This can be due to many reasons such as increased expenditure, inflation etc. For instance there would not be good earning after retirement of a person. After retirement the expenditure might be same but the earning would be less. The premium payment capacity reduces with increase in age as the policyholder might be not able to continue the premium payment after retirement. If 1crore term life insurance policy is taken for the age up to 80 years of the policyholder and the policyholder retires after 60 years of age, then it might be difficult for the policyholder to continue with the premium payment after the retirement.

Crore term insurance exclusions

Most term life insurance policies offer different kinds of customisation, based on the level of protection and coverage you are looking for. Even with the term insurance terms and conditions, there may be changes based on the individual policyholder.These term insurance terms and conditions, otherwise referred to as exclusions, list out the situations under which your beneficiary’s claims will be rejected. While most will be customised in accordance with the insurer and the individual policyholder, there are several exclusions that remain common across most term life insurance policies

Suicide and/or Death due to hazardous activity

Cases of suicide are always listed as exclusions on term life insurance policies. In addition to this, cases where participation in dangerous activities may lead to death are also included in the exclusions. This could include adventurous sports that may commonly result in death, demonstrated by a previous track record of accidents.

Participation in Criminal Activities

This exclusion essentially states that if the policyholder’s death has been caused owing to their participation in criminal activities, their beneficiaries will not be able to claim term insurance benefits, i.e. the sum assured. This is quite a common exclusion and there are no add-ons that can offer protection to policyholders against this exclusion.

Pre-Existing Medical Conditions

Before you receive your policy, it is mandatory for you to reveal all the health conditions that you are suffering from or are likely to suffer from, owing to pre-existing conditions or even hereditary conditions. Your term insurance policy will always be drafted keeping in mind these conditions and it will affect your term insurance premium amount. However, if there is any pre-existing medical condition that was not revealed to the insurer before availing the policy, you will not receive coverage for it. This means that if you die of a pre-existing medical condition that the insurer did not know about, your beneficiaries will not be able to receive the death benefits.

Death under the influence of alcohol or drugs

Life insurance companies in India mostly refuse to provide term insurance cover to habitual drinkers and drug abusers. One cannot hide this claim from the insurer. Even if you hide your drinking problem and drug addiction, buy a term insurance plan, and die due to an accident or some other incident under the influence of drugs or alcohol, the insurance company may reject your life insurance claim as per the terms and conditions specified therein.s

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