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3 Benefits of Life Insurance You Must Choose to Secure Your Family's Future

3 Benefits of Life Insurance You Must Choose to Secure Your Family's Future

What is there to work and live for if not the family’s future? And when it comes to securing their future in your absence, it makes sense to be uncompromising. That is why when you are going to choose a term insurance cover, make sure to not compromise on these three benefits.

Regular Income Option

Every household needs a regular income to function and meet its immediate and frequent financial needs. In the absence of a safe regular income option, even after the settlement of life insurance, the families may face a difficult task. They have an unprecedented amount of money in their hands and from this money, they need to:

  • Meet their household and life expenses for a long time to come
  • Meet all their important financial goals

Even the experienced wealth managers struggle to meet these two expectations without proper support. The usual solution for regular income is an annuity plan from the life insurer. Meaning you reinvest some of the money you received from the insurer back with the company to receive a regular income.

However, there are two big questions here:

  • How much to invest for income; i.e. how much income should the family aim for?
  • How much money the family should invest in long-term assets to meet their financial goals?

The best option is if you can decide this for them at the beginning itself. Regular income feature enables you to offer a safe income to your family in case of your early demise. This feature relieves your nominees from the responsibility of investing a large sum of money to generate a regular income.

How Does Regular Income Feature Work?

Different term insurance plans may offer a slightly different version of the regular income feature. But, for this article, we are considering i-Select+ term plan from Canara HSBC Life. This plan offers three pay-out options for the death claim:

  • Lump-sum pay out only
  • Lump-sum with fixed income pay out
  • Lump-sum with growing income pay out

While lump sum only is the traditional model, the real choice is between lump sum with fixed and growing income. Here’s why you should select the growing income option for your family:

  • Lifestyle expenses grow over time even if it remains the same - Inflation
  • In case of fixed income, the family’s lifestyle will deteriorate

In the case of growing income, the regular sum which the insurer pays monthly, increases by a fixed percentage every year. This growth could be small but will help your family meet the inflation and continue their life as best possible.

Features of Term Plans to look out for

Critical Illness & Disability Cover

Critical illness and disability covers are add-on covers the best life insurance plans offer. Why should you add them to your life cover? Here are a few important reasons:

  • Critical illnesses account for about than 50% of total deaths in India
  • Death due to illness is not a sudden act. It may take weeks of hospitalisation and medical expenses before the ultimate demise
  • Many such illnesses may affect your earning capacity long before becoming terminal
  • A few of these illnesses may cause disability as well
  • Accidents have a similar trajectory of death and disability

Thus, adding critical illness and accidental death & disability cover to your term plan increases the umbrella size of your cover. Since both of these risks can increase the financial burden on your family, you need additional covers for them.

Also Read - Short term vs Long term Disability Insurance

Adequate Life Cover

As your family grows, your financial and life responsibilities also grow, and even after these, your family’s lifestyle would grow due to your growing income. This means that the life cover you bought five years ago may become insufficient now and so on.

The best life cover has to grow with your financial needs and should be able to keep up with your life goals. Canara HSBC Life’s i-Select+ term plan covers this benefit in two ways:

  • You can buy an increasing cover, which will keep growing by a fixed percentage every year, or
  • You can opt to increase your life cover at important life events like marriage and childbirth

In the first option, your premium will remain the same and the life cover will keep growing up to a certain limit. In the second option, your premium will only grow once you avail the increased term cover. However, both options eliminate the need for you to buy another term life cover every few years.

While the first option works automatically, in the second option you only need to intimate the insurer about the life event.

Other Significant Benefits You May Like

These three benefits are quite useful when it comes to the primary purpose of life insurance for your family; i.e. financial safety. However, with the best life insurance plan, you can do a lot more. For example, the iSelect Smart360 Term Plan offers the following additional options:

  • Return of Premium
  • Life cover till 99 years of age
  • Life cover for homemaker spouse

The return of premium ensures that the money you paid for the life cover doesn’t disappear as sunk cost if you survive the term. Instead, you can recover it at the expiry of the policy.

Life cover till 99 years of age turns your term life cover into an estate plan. In this option, your children or grandchildren will certainly receive the life cover amount, even in case of your natural death.

Life cover for a homemaker is something you should consider very seriously. Since despite her not actively earning an income, her presence in the family reduces a lot of expenses, and adds a lot of value, many of which cannot be measured in money.

The cover for a non-working spouse is linked to your term cover, and usually only up to 50% of your cover is allowed for the spouse.

The best term plans often have features and options which can serve almost every need you may have in life. So, look closely and discuss with your financial advisor to understand the plan better before getting into one.

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