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

dateKnowledge Centre Team dateDecember 05, 2020 views90 Views
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 OBC 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 OBC 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.

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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

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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