Here's What You Should Do With Your Life Insurance Plans In 2021

If you had been one of those postponing your life cover decisions till 2019, 2020 would have woken you up pretty good. And if you finally bought the life and health insurance in the year, you may ask, ‘would you do it if there was no pandemic in 2020?’

And, ‘would your situation be any different if the pandemic was to be postponed by a year?’

The answer should not surprise you. Good times can often deceive even the most cautious from the impending dangers. The fact is that the number of deaths caused by COVID-19 almost equals (is slightly lower) the number of accidental deaths in India.

Meaning the risk to individual life remains almost unchanged despite the pandemic. So, pandemic or not, you need to consider contingency planning from day one of your investment life.

Hopefully, by now you already have a health and life cover. So, can you relax now? Or is there more to do with your life insurance plans? Here’s a list of small steps you must take to ensure your life insurance doesn’t leave a corner of your life uncovered.

Ensure Your Term Cover is Adequate

Buying term insurance cover is one thing. However, ensuring that it is adequate is equally important. An inadequate cover would be like travelling to experience Paris, but returning from Dubai. You need to ensure that your term cover can provide for your family in your absence as well as you do, if not better.

Here are two aspects you need to ensure with your term insurance plan:

• The cover can keep up with your income and family’s lifestyle
• It will pay a large enough sum to your nominees to take care of immediate debts and investment needs of important financial goals
• Your family will receive a growing monthly income from the plan for a long time to cover their household and life expenses

Only the best term insurance plans offer all three options in one place. For example, iSelect term plan from Canara HSBC life gives you two options to increase your term life cover:

• Based on life events like marriage, childbirth, home purchase
• Every year automatic growth until the base cover doubles

You can also divide the entire sum assured in two parts – lump sum and regular income. Dividing the sum assured means you are giving your dependents money to invest and pay off debts along with a monthly income.

Your Health Cover Covers COVID-19 Hospitalization & Treatment

While you may have a health cover to take care of emergency hospitalization expenses, you should ensure that COVID-19 expenses are not excluded. Regardless of the improving statistics about the disease, the dangers of this virus evolving into another strain are high.

Thus, even if you have recovered the first time, you cannot consider this gone forever. If your existing Mediclaim policy does not

Insure Your Family’s Financial Goals

You have two types of long-term financial goals in your life – one, aspirational goals achieving which will make you feel great, others, which are your basic responsibility. It is these responsibility goals which you must achieve in your life, as your children’s financial future depends on it.

While investing for such goals, you will feel much better with investments if they can ensure goal achievement regardless of your presence. Since this involves providing the family financial support after your early demise, only life insurance plans can offer a solution.

Investments like guaranteed savings and unit-linked insurance plans can offer to achieve your goal as per your risk appetite. At the same time, these investments can also protect the financial goal from setbacks like sudden death.

Guaranteed Savings Plan

The guaranteed investment plan offers a maturity value you can define in the beginning. Thus, offering you safest route to your objective. This plan is most useful for goals where you cannot compromise on your financial value. For example, higher education or marriage of the child.

ULIP Plans

ULIP plans offer a unique blend of features to help you invest more aggressively and without worries. You can invest in equity, debt or liquid funds depending on your risk appetite and still receive tax savings.

At the same time, automated allocation management strategies help you manage your portfolio without any additional effort.

Add ULIP to Your Retirement Plan

We have already discussed the flexibility of ULIPs with the type of investments you can choose. ULIPs are also great instrument if you can plan your retirement pension with it. Few ULIP plans including Invest 4G from Canara HSBC Life, provide you with a maturity age of up to 80 years.

With a high maturity age, and tax-free withdrawals you can create a tax-free pension out of a ULIP plan like Invest 4G. All you need to do is to make sure you have large enough corpus by the age of 60. However, to ensure the tax-free status of your pension withdrawals, you will need to:

• Start investing early
• Select a life cover amount which is more than 10 times your annual present investment in the plan

Remember that withdrawals from your ULIP plan are tax-free only as long as you keep your annual investments up to 10% of the life cover. Thus, starting early (possibly in 2021) will help you accumulate large enough corpus by the time of retirement.

Ensure Your Spouse Also Has Life & Health Cover

While most life insurance covers are meant for the breadwinner of the family, your homemaker spouse too should have a life cover. That is because of her contribution to the survival of the family is also crucial.

Few term insurance plans, including iSelect term plan, offer joint life cover option. With iSelect term plan, you can provide a term life cover to your homemaker spouse of up to Rs. 25 lakhs.

Apart from a life cover, your spouse also needs the cover for life-threatening diseases like cancer and heart failure etc. While your family floater Mediclaim cover provides for the emergency hospitalization, it will not be adequate for such treatments.

Fortunately, iSelect term plan provides critical illness cover as an inbuilt benefit. So, when you insure your spouse under the cover, she will automatically have a critical health cover. If you have already purchased the plan, you can add your spouse to the same plan within one year of the start date.