Life insurance is one of the most important investments that a person can make. It provides financial security to the family. Unfortunately when it comes to getting traditional insurance, companies require income documents to decide the level of coverage which means people from the unorganized sector who may not have these documents cannot get any insurance coverage.
To fill in this gap, the Government of India introduced the Pradhan Mantri Jeevan Jyoti Bima Yojana which is a social security scheme. Under this scheme, people can enrol to get basic life insurance coverage.
Let us understand how the Pradhan Mantri Jeevan Jyoti Bima works:
The PMJJBY is a beneficial scheme meant for people within the age group of 18 years to 50 years. The PMJJBY scheme will continue till the age of the policyholder reaches 55 years and then it will terminate.
The policy renews every year on payment of premium. The eligibility criteria for a person to enrol under this scheme is to have a bank account that is KYC compliant. The premium for the Pradhan Mantri Jeevan Jyoti Bima Yojana is Rs. 330 which makes it the most affordable insurance scheme available in India.
The PMJJBY policy pays out a compensation or death benefit of Rs. 2,00,000. This scheme is a term insurance policy which means it does not have any maturity benefit. The premium collected is purely meant to cover the cost of insuring the life of the policyholder. If the premium is not paid for one year, then the policy cover lapses.
Like a standard insurance policy, the PMJJBY policy also has a period of 45 days during which no claims will be honoured. It also has a grace period of 30 days from 1st June or the date of start of the insurance policy. If the premium is paid during the grace period, it will be treated as if the insurance policy did not lapse. Since there are no accrued benefits under this scheme, if the insurance premium for PMJJBY scheme is not paid in time, the policy lapses. However, it is possible to get back into the scheme by paying premium once again. There is a pro-rata quarterly schedule for PMJJBY coverage i.e Rs. 258 for three quarters, Rs. 172 for two quarters and Rs. 86 for coverage for one quarter.
The premium of Rs. 330 is split up into Rs. 289 as life insurance premium, Rs. 11 as reimbursement of costs to the bank and Rs. 30 as reimbursement to the agent or bank.
Enrolling in the Pradhan Mantri Jeevan Jyoti Bima Yojana will get you a tax benefit under Section 80C of the Income Tax Act. The proceeds received from this insurance policy will be exempt from tax under Section 10(10D) of the Income Tax Act. This means it wont be treated as income of the nominee or legal heir.
To make a claim under the Pradhan Mantri Jeevan Jyoti Bima Yojana, you need to fill up a claim form and submit it along with the death certificate of the policyholder to the bank. The bank will submit the claim to the insurance company and the insurance company will process the claim.
All About Bank And Loans in India 