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How much supplemental life insurance coverage should you buy?

dateKnowledge Centre Team dateJune 22, 2021 views292 Views
Supplemental Life Insurance | Buy Life Insurance Policy

Life can bring a lot of things and a life insurance plan helps you remain prepared for it. However, when the job you have is one filled with risks and may lead to your death, your employer offers benefits to you and your family. This is also something that many companies offer even if the job is not risky.

Supplemental life insurance is provided by the employers or any private sector to its employees to provide coverage in crucial times, such as during the death of a member or costs that occur while performing rites and burial, to fulfill the needs of a large/joint family, and more. Most of the time, this life insurance plan is an added coverage that is available to the employees along with the other insurances while working in a company.

This insurance can be considered as additional coverage insurance that can be purchased with term-life insurance or any other type of insurance that comes under the life insurance plan India.

Purchasing this policy will be beneficial as it is an extra asset along with the traditional life insurances, which helps in increasing the value of the overall money accumulated from life insurances. The money accumulated on account of this policy can be of immense help, for instance, at the time of your death, as it will become a means of extra financial help.

The amount of money received from this policy is generally some multiple of the employee’s annual salary. Since the monthly salary might be insufficient for the employee to fulfill the needs of the family, the supplemental life insurance will help as additional financial aid.

Deciding supplemental life insurance coverage – How much should you buy?

Deciding on how much money to invest for supplemental life insurance cover is a very crucial decision and should be done with a proper plan and understanding. Important matters that play a vital role in the purchasing of supplemental life insurance include:

1. Buying a term life insurance, depending on the number of members in the family as well as the financial status, will allow one to know exactly how much coverage is required.

2. If there are debts, interests, cosigned loans, mortgages, then purchasing the appropriate supplemental life insurance will help in paying it off.

Another crucial point to focus on before determining how much supplemental life insurance to buy is to foresee the needs of the family members. According to financial experts, purchasing 10 to 15 times the annual income should be the minimum amount of coverage an individual should invest in.

Supplemental life insurance is also used as a replacement for income. If an individual happens to earn around Rs. 3 lakhs a year, there should be enough policy payout to replace this income as well as some extra money to bear the inflation. To be able to buy the right amount of insurance, it is essential to calculate the required face value beforehand.

How much does supplemental life insurance cost?

Various factors determine the cost of supplemental life insurance cover, one such important factor being age. To avail the supplemental life insurance at a company, a younger employee will have to pay less than a comparatively older employee. The premiums increase with age because the pricing of supplemental life insurance policies available through work are not confined.

One such plan that offers supplemental life insurance according to the paying capability of an individual is provided by Canara HSBC Oriental Bank of Commerce Life Insurance. Invest 4G plan is a unit-linked individual plan (ULIP) that allows you to custom-make the installments for payment, depending on your plans, goals, and ever-changing needs.

This plan comes under the non-participating policy, which means that any profits gained from this plan will not be shared, and also, no dividends are to be paid to the policyholders. It consists of the characteristics of both flexibilities as well as portfolio management options which enable you to have complete control over your insurance needs and savings. Some significant benefits of this plan include:

1. Protection of family: If you happen to face an accidental death, your hard-earned savings invested in insurances will protect your family.

2. The habit of savings: Be it in youth or after marriage, investing in supplemental life insurance cover will allow you to reap the benefits in your future.

3. Future plans: Plans can be anything. For instance, for a youngster, it could be going to college. For an adult, it could be to provide a secure life for the family. Regardless, signing up for a life insurance plan in India will promise you a happy and trouble-free future.

4. Creating a legacy: Making beneficial calculative plans, be it in terms of safeguarding the wealth to meet the future financial goals or even creating a legacy, will eventually provide you a golden future.

3 Factors to consider before buying a supplemental life insurance

It is important to carefully analyze the various supplemental life insurances provided by various groups. To avail oneself of maximum benefits, it is essential to assess the insurances before purchasing the most fruitful one. It can be done based on the following factors:

1. Pricing

Pricing depends on whether a group or an individual is purchasing the insurance. There are different prices for each group as well, which is determined by analyzing the demographics, policy design, life expectancy, past claims, and more.

2. Conversion

Some supplemental life insurances bought as a group or organization on request can be converted into an individual plan as well. If the group life insurance policy is reduced or terminated, converting the plan may be an option unless the employer has paid the premium.

3. Portability

Generally, supplemental life insurance acquired from an organization might not be portable meaning, if you happen to leave your job or retire, there may be chances of you losing the life insurance. But certain companies allow you to carry forward the life insurance. If you want to port the policy, you will have to pay its premiums since it will no longer be a group life insurance policy.

Is a term insurance policy portable?

Purchasing supplemental life insurance should be done with proper evaluation and plan so that you and your family will be able to reap maximum benefits from it in the future. Secure your family’s future with a supplemental life cover from Canara HSBC Oriental Bank Of Commerce Life Insurance with products like Invest 4G, Guaranteed Savings Plan, and iSelect Star.

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Frequently Asked Questions (FAQs) for Life Insurance

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.

Life insurance plans come with several riders which increase the efficiency of the policy for the buyer. For instance, if you have a history of terminal illness in your family it would be advisable to opt for terminal illness rider with your term insurance. Riders or add-ons help in customising the standard policy benefits for the requirement of different families. The iSelect term insurance plan comes with a built-in cover for terminal illness, and option for protection against accidental death or disability. You can also opt to cover your spouse's life under the same policy by paying an additional premium.

Insurance companies calculate the premiums based on several factors such as age, gender and occupation.

Age:It is one of the biggest factors that influence life insurance premiums. Premiums tend to be low when the life insured is younger as the chances of contracting diseases is low. Young people also opt for policies with longer tenures and pay premiums for a longer duration, which makes the policy cheaper for young people.

Gender:The insurance premium for women is generally lower when it comes to life insurance plans. Women live longer and pose a lesser risk of a claim leading to lower premiums for them.

Lifestyle habits:The premiums for people who smoke or drink is always higher due to higher health risks.

Policy term:Policy terms are also taken into consideration by insurers while deciding the premium amount. Policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the policy also determines how much you will have to pay for the plan. People who buy life insurance policies online have to pay lower premiums as compared to offline policies.

Occupation:The nature of your work is an important factor that influences the premium amount. Certain occupations like shipping and mining are considered more dangerous as compared to jobs in services industries. The insurance premium rises with the risk profile.

Processing life insurance claim is a transparent and smooth process with Canara HSBC Oriental Bank of Commerce Life Insurance.

In case of the death of the life insured, the nominee will have to intimate the company by filling a Death Claim Form and sending it to the nearest branch office.

Once the form is received, the claim is registered by the insurer.

After the registration of the claim, the company will send the claims pack along with the related forms such as physicianâ s statement form and employer certificate that need to be filled.

Along with the duly filled forms a few documents such as original [policy document, death certificate, copy of bank passbook, hospital or treatment records, photo identification and address proof have to be provided.

The claim is processed on the submission of relevant documents. Once the documents are verified, the claim amount is released post all due diligence.

Household expenses rise with age. The cost of children's education increases along with other lifestyle expenses. The iSelect term plan offers an option to increase the cover according to the life stage. If opted, the insurance cover increases by 25% at every 5-year terminal till the 20th policy year.

Even though a life insurance policy is bought to protect your family in your absence. There are chances of the claim being rejected due to several factors.

False information: If the policyholder provides false information or conceals important information while buying the policy, the insurer has the right to reject the claim after his/her death.

Type of death: Deaths due to suicide in first policy year, intoxication or pre-existing disease is not covered under life insurance.

Premium payment: The payment of premiums on time is of utmost important to avail the benefits of life insurance. Life insurance policy may lapse on the failure to pay the premiums

Nominee details: An insurance company can put the claim on hold if the nominee details have not been filled or not been updated by the policyholder.

Suicide: If the life insured commits suicide within 12 months of buying the policy, the insurance companies generally pay 80% of the total premiums paid.

Buying life insurance online is not only safe but a better option. Online life insurance policies have lower premiums and the individual is not required to visit the insurer's branch or a bank. Online insurance policies also offer higher benefits. Customers should, however, buy online policies only from credible insurers and should check for SSL certificate on the website to ensure that the website is legitimate.

The cost of life insurance policies varies depending on factors like age, gender and occupation. The average cost of life insurance plans, especially term plans, is very low compared to the amount of coverage offered.

An individual is allowed to have multiple life insurance policies. People opt for more than one policy to increase the cover or avoid claim rejection. In case of multiple policies, even if the claim is rejected by one insurer, the beneficiaries may receive the benefit from a different insurer.

Life insurance policies are of different types. In the case of unit-linked or endowment policies the policyholder receives the maturity benefit at the end of the policy term. However, in the case of term insurance plans, there are no maturity benefits. The death benefit is only paid out after the death of the life insured.

When you buy life insurance, the insurance company asks for the nominee details. Only the person named as the nominee in the policy can cash out a life insurance policy in case of death of life insured.

A life insurance policy is generally taken for a specified period. After the policy duration of a term plan gets over, the policy simply terminates and ceases to exist. However, in the case of unit-linked plans or endowment, you can use the policy as a tool for retirement planning and the accumulated corpus is used by the insurer to pay you monthly amounts for your entire life.

If a policyholder purchases a term plan for 25 years and dies during the policy term. The family receives the death benefit. In the case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment options are chosen the policy works as a source of regular income.

It is a popular misconception that life insurance is only for accidental deaths. A term life insurance plan like iSelect also covers terminal disease along with death. A terminal illness cover is important as health insurance pays only for the cost of treatment and hospitalization, but a terminal illness cover pays you a lump-sum amount which takes care of other expenses. On the other hand, unit-linked policies such as Invest 4G cover death and also provide decent returns for other financial goals such as buying a house of child's education.

It is ideal to buy life insurance in your early 20s because it’s is the time when people have just started with their professional life and so there are lesser responsibilities and financial liabilities to take care of. Also, if you buy life insurance at this age, you will be paying relatively lower insurance premiums since it’s a due fact that mortality rate in case of young people is low. And that is why insurance companies offer lesser premium rates to younger people as they think that they are most likely to be fit and healthier with less chances of filing a claim in future.

Once you have cancelled your life insurance policy, you will instantly lose your life insurance cover. Afterwards, your insurance company will get in touch with you and ask for valid reasons regarding the cancellation of your policy. In case you cancel your life insurance policy within the grace period, i.e. 15 to 30 days, depending on your insurer, then insurance company will reimburse the premium amount paid by you. But, no refunds will be paid to you if the policy is cancelled after the grace period.

Yes, you can take life insurance under Married Women’s Property (MWP) Act, 1984 only if you are a married man and a resident of India. Buying a life insurance plan under MWP Act would be helpful in saving your family’s financial well-being when you are not around. As per this policy, only wife and children would be eligible to receive the death benefits. You can also buy a policy if you are a widower or a divorcee. However, in that case, you can give your child’s name as your beneficiary. It is very simple to buy a life plan under MWP Act. All you need to do is to fill up an MWP addendum while purchasing an insurance policy.

Yes, there are different payment options for you to pay premiums. Here’re some of them

    1. Regular premium payment option – This premium payment option allows you to pay premiums equal to your policy term either monthly, quarterly, half yearly or annually.

    2. Single payment option – Through this premium payment option, you can pay the lump-sum amount in one single payment.

    3. Limited payment option -In this premium payment option, you can pay premiums for a specific period of time less than policy term either monthly, quarterly, half yearly or annually, but benefits of insurance can be enjoyed for a longer period of time.

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