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Do I need life insurance Plan if I have a lot of savings?

dateKnowledge Centre Team dateAugust 19, 2021 views234 Views
Life Insurance Plan | Best Life Insurance Plan | Buy Life Insurance Policy Online

Even if you have a large inheritance and perhaps do not need to earn money actively, you still need good financial decisions to protect your wealth. Not only this, but you have many compelling reasons to consider life insurance, regardless of your financial status:

1. Covering the cost of death, disability or terminal illness
2. Buffering the period of transition for the family after the death of the primary breadwinner
3. Preserving the family’s financial fortune
4. Passing on the legacy to the next generation

You save money primarily for financial and medical emergencies, ensure a bright future for the child, meet larger financial goals, have a comfortable retirement, and to leave a legacy/inheritance for the next generation.

However, it is unlikely that you can prepare adequately for all of these things with just your first paycheque. Emergencies are not predictable and can even cause trouble for the wealthiest of the lot. So does retirement if you are not careful.

Cost of Death

The death of a family member causes tremendous trauma and emotional loss to the surviving family members. The emotional scars are irreparable, irreversible and very deep. To add to the woes, if the departed soul was the sole/major breadwinner of the family, the household could plunge into a financial crisis

Unpaid rents, school fees, lifestyle costs and even basic household maintenance will become a challenge. Look at Karthik’s case below.

Karthik, aged 37 years, died of massive cardiac arrest, caused by tremendous stress at work. He has left behind his wife, 2 children aged 7 years and 4 years. He was earning an annual income of Rs. 10 lakhs and had accumulated savings of Rs. 25 lakhs.

His demise has left a vacuum in their hearts as well in the bank account. The family is perplexed. How will they manage and for how long? The cost of death is huge.

Cost of Death = Loss of Income + Opportunity Cost

… because children will lose opportunities to get quality education and build strong careers.

The loss of income will degrade the quality of life as Karthik’s wife will not be able to sustain the lifestyle with meagre savings.

Before Karthik’s demise, she was planning to attend a skill development program that could help her start a career. The plan was to build a parallel income source in future when the kids would grow up. But all these plans have now shattered, and survival has become a priority. She sometimes wishes, ‘what if Karthik had invested some money in life insurance?’

Accidental Injuries and Death

Accidents and terminal illnesses are another expensive set of emergencies. Inflation in healthcare costs is higher than average and private healthcare in India is already exorbitantly expensive.

The cost of death from an accident or a terminal illness is usually much higher than in other circumstances. Thus, the family should have additional financial support for such emergencies.

What Will Your Family Need After You?

Every family has the following financial needs. While you will fulfil these and more during your lifetime, it is important that even in your demise these are looked after:

a) Regular income for household and lifestyle maintenance
b) Amount to pay off ongoing debts
c) Amount to meet important future expenses, i.e., child’s higher education and marriage

Providing Adequate Protection to the Family with a Life Insurance Plan

The wealth you have carefully built or have inherited, should not be eroded in case of an unfortunate natural event like death. The purpose of life insurance is to help your family maintain their financial fortune until they can come of age and start making bigger financial decisions.

Yes, you do need life insurance because that is also a type of saving, albeit a smart one. A term life insurance cover can provide adequate financial protection to your family in case of terminal emergencies. This goes straight to your spouse and children to support their living costs and important financial goals.

The best life insurance plans provide every feature to help your family receive adequate financial support when they need it. For instance, life insurance plans from Canara HSBC Oriental Bank of Commerce Life Insurance offer the following:

1. Regular income pay-out from term insurance claims along with a lump sum pay out

2. Regular income pay-out can be increasing to adjust for inflation

3. Premium protection option for saving plans, so that your child has the money you planned even after your early demise. (The insurer pays the remaining premiums in the case of your death.)

4. Chance to increase your term life cover after key life events like marriage, childbirth and home purchase.

Who Needs a Life Insurance Plan?

If you can relate to Karthik, you need life insurance. Insurance should be purchased when you do not need it because you may not get one when you need it the most. If you are young and just started working, this is the right time to sign up for an insurance policy. Premiums increase with age and your future family certainly needs financial cover. If you have dependent parents at home, it is another compelling reason to have an insurance policy in your kitty.

If you are already in your 40’s, insurance could be expensive but still worth the investment. A Rs. 1 Crore Sum Assured policy for a 40-year-old will cost approximately Rs. 18,000 to Rs. 24,000 per annum depending on the tenure chosen.

Is there anyone who does not need life insurance? Practically no one.

Additional Benefits of Buying the Best Life Insurance Plan

The iSelect Star Term Plan offered by Canara HSBC Oriental Bank of Commerce Life Insurance offers to add on riders such as Accidental Total and Permanent Disability Benefit and Accidental Death Benefit along with the policy. The key advantage is that the Sum Assured is immediately paid out and future premiums are waived off. The other features and benefits continue till the end of the term. This helps the person manage the expenses incurred because of loss of income due to the accident and continues to offer life cover thus giving further assurance to the family.

The Child Support Benefit (CSB) is a unique feature of iSelect Star Term Plan that gives a fixed amount in case you are diagnosed with a terminal illness. This helps your family manage expenses related to a child’s education at different stages in life. This is an add on feature implying that the other benefits of the policy will continue as usual.

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Frequently Asked Questions (FAQs) Related to Life Insurance Policies

The premium is one of the most important factors to consider before buying a life insurance 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

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 plan. 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.

Life 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 chance of contracting diseases is low. Young people also opt for the best life insurance 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. Life insurance policies with longer tenure are cheaper as compared to short-duration policies.

Mode of purchase: The platform that you use to buy the best life insurance 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 physician’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 life insurance 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 plan.

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: A life 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 life insurance policy, the insurance companies generally pay 80% of the total premiums paid.

Buying the best life insurance plan 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. The best life insurance policies online insurance offer higher benefits. Customers should, however, buy online life insurance 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 life insurance policy to increase the cover or avoid claim rejection. In case of multiple life insurance 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 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 a life insurance policy, the insurance company asks for the nominee details. Only the person named as the nominee in the life insurance plan can cash out 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 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 beneficiary receives the death benefit. In case of iSelect term plan, the policy provides four payment options to the beneficiaries. If the regular payment option is chosen, the policy works as a source of regular income.

It is a popular misconception that life insurance plans are only for accidental deaths. A term life insurance plan like iSelect Star Term Plan 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 a life insurance plan in your early 20s because it 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 the best life insurance plan 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 life 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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