How To Secure Your Family With Life Insurance

2024-08-02

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An average urban Indian has little or nothing to fall back upon in the event of a financial emergency. On a scale of 1 to 100, the protection quotient of Indians is a mere.

Low insurance penetration and little or no awareness among the general public only aggravates their prehensions. More than half of the Indian population feel that they would be left vulnerable financially if the earning member of the family should meet with an unfortunate incident.

36% are of the view that in case a family member was diagnosed with a critical illness such as cancer or heart disease among others, their life savings would be exhausted in a few months. To top it off, 80% are not even aware of the skyrocketing costs of treatment for most of these illnesses. The situation is further complicated by the fact that one-fifth of those surveyed opine that they are completely on their own with little or no support from anyone.

Key Takeaways

Life insurance is essential for securing your family’s future, especially in the face of financial emergencies or health crises.
Buying insurance early in life helps you save on premiums and ensures long-term protection.
Carefully assessing your coverage needs, comparing plans, and understanding claim settlement ratios is crucial before purchasing.
Important life events like marriage, parenthood, or taking a loan are ideal triggers to get insured.
Avoiding common mistakes like underinsurance, delay in purchase, and ignoring riders can ensure better protection.
Periodically reviewing your policy ensures it stays aligned with your changing financial responsibilities.

This speaks to the dire need for life insurance in the lives of the Indian working class. The benefits of purchasing life insurance are plentiful and can make a world of difference in the life of the everyday Indian.

Why Purchase Life Insurance at an Early Stage?

Purchasing life insurance as soon as you start earning is not only cheaper, but its also gives you an early bird advantage by securing the financial future of your prospective family. They need not be dependent on anyone for their day-to-day needs and can maintain their standard of living, even in your absence. It is also a useful tool in financial planning for the long term. It can fund your child’s education and pay off any debts such as a mortgage, two-wheeler loan or credit card debt. Not only is the premium amount eligible for tax deduction as per Section 80C, but the death or maturity proceeds also qualify for tax saving under Section 10(10D).

Disclaimer: Tax benefits are subject to change in tax laws. Please consult your tax advisor.

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Safeguarding Your Family with Life Insurance

However, even with all the benefits outlined above, it is important to carefully choose a life insurance policy, rather than buying one in haste. Since it is a long-term investment, it pays to spend some time analysing what suits your needs. Here’s how you can efficiently secure your family with life insurance:

Determine the amount of life cover required: As a rule of thumb, the amount of coverage offered by a plan should be equal to your current annual income multiplied by 15 or 20, if you are less than 40 years of age. Your sum assured should be 10 to 15 times your annual income, if you are past 40 years of age. This is to ensure that, in your absence, your family is financially independent and can maintain their standard of living as well as take care of immediate needs. You should also factor in any existing medical conditions, debts that you are paying or future needs such as your children’s education, when purchasing life insurance. The policy should be in tune with your requirements and provide adequate protection.
Compare different policies before zeroing in: Researching different plans available in the market and the benefits that they offer is vital before you zero in on a life insurance policy. Premium rates differ depending on the cover chosen, policy period, features and benefits offered and whether you have a lifestyle that includes smoking or drinking. Online policies might be less costly as compared to buying one offline. Most insurance companies have detailed disclosures on their websites providing all the information to help you make an informed choice.
Claim Settlement Ratio: One of the things to consider before buying life insurance, is to check the claim settlement ratio of the insurance provider you’re about to settle for. The claim settlement ratio is nothing but the total number of claims settled against the aggregate claims filed against a company in a year. The higher this ratio, the lesser are your chances of a claim being rejected. The Insurance Regulatory Authority of India releases the annual ratios of claim settlement for all insurance providers.
Premium Frequency: Certain term insurance policies and providers offer policyholders the benefit of flexible premium payment options. Would you prefer to pay your policy premium as a lump sum or in a yearly, quarterly or monthly manner? Depending on your financial preferences and budget, you can decide what frequency seems more affordable and convenient for you.
Riders:Most insurance companies offer a choice of additional riders in the form of accidental death benefit, child support riders and critical illness riders, among others. These help to provide additional protection over and above the policy opted for. Make sure to enquire about these before purchasing life insurance.

So that’s how you can secure your family with life insurance. Ensure you take into account all the aforementioned points to arrive at the right policy as per your needs.

One term plan that you can consider is the iSelect Smart360 Term Plan from Canara HSBC. You can benefit from inbuilt riders and flexible premium payment options. You can even increase or decrease your coverage, in line with your financial situation. To sum up, life insurance can be a boon for a working-class Indian family; with the iSelect Smart360 Term Plan, you too can secure your family today.

Many people postpone buying life insurance, assuming it's something to consider later in life. However, understanding the right time to invest can make a big difference in both affordability and the level of protection you receive..

When Is the Right Time to Buy Life Insurance?

There’s no one-size-fits-all answer, but certain milestones in life act as natural cues that it’s time to secure your financial future with life insurance. Here are some key moments when buying a policy makes the most sense:

Starting Your First Job: The moment you begin earning, you also begin building responsibilities, whether it’s supporting your family or managing your expenses. Buying a life insurance policy at this stage ensures lower premiums due to your younger age and typically good health. It’s a cost-effective way to start building long-term financial security.
Getting Married: Marriage often brings shared financial goals and responsibilities. A life insurance plan at this stage helps protect your spouse financially in case something unexpected happens. You may also want to consider adding spousal coverage or adjusting your sum assured to reflect joint future goals.
Becoming a Parent: Having a child is one of the strongest reasons to invest in life insurance. It’s essential to secure your child’s future, education, healthcare, and overall well-being, even if you’re not around. This is a good time to review and possibly increase your coverage to match your growing responsibilities.
Taking a Loan or Mortgage: If you’ve taken a large loan, be it for a home, education, or a vehicle, it’s important to ensure that your loved ones are not burdened with repayment in your absence. A life insurance policy can act as a financial cushion to clear any outstanding liabilities.
Reaching Milestones in Career or Income: As your income grows, so do your lifestyle and financial commitments. Periodically reassessing and upgrading your life cover ensures your policy remains relevant and continues to meet your family’s needs.
Planning for Retirement: Even if you’re nearing retirement, it’s not too late. A life insurance policy, especially one with maturity or pension benefits, can provide peace of mind, support estate planning, or act as a financial legacy for your family.

Common Mistakes to Avoid While Buying Life Insurance

While choosing the right life insurance plan can offer long-term financial security, rushing into a decision or overlooking key details can dilute its effectiveness. To truly protect your loved ones, be aware of these common pitfalls:

Underinsuring Yourself: Many people underestimate the amount of coverage their family might need. A smaller premium may seem appealing, but it often results in inadequate support when it's needed the most. Remember to consider inflation, outstanding loans, future education costs, and day-to-day living expenses while determining your sum assured.
Delaying the Purchase: Waiting too long to buy life insurance can significantly raise your premium cost, or worse, limit your eligibility due to health changes. The younger and healthier you are, the more affordable and accessible your coverage will be. Procrastination could mean losing out on this advantage.
Focusing Only on Tax Benefits: While life insurance does offer tax savings, buying a policy solely for deductions under Section 80C or Section 10(10D) is short-sighted. The primary objective of life insurance is financial protection. A plan that’s tax-friendly but doesn’t align with your family’s needs may leave you exposed.
Ignoring Riders and Exclusions: Riders like critical illness, accidental death, or waiver of premium can add immense value for a small cost. On the flip side, failing to read the policy exclusions—such as clauses related to suicide, self-harm, or certain medical conditions—could result in denied claims when you least expect it.
Not Reviewing the Policy Periodically: Life evolves, your income grows, family expands, and responsibilities increase. If you don’t review your life insurance coverage every few years, your policy may fall short of covering your current lifestyle or financial commitments.

Wrapping Up

Life is full of uncertainties, but your family’s financial security doesn’t have to be one of them. Life insurance is a promise that your loved ones will be protected, come what may. By investing early, choosing the right coverage, and avoiding common pitfalls, you can create a strong financial shield around your family.

The iSelect Smart360 Term Plan by Canara HSBC Life Insurance offers a well-rounded solution with built-in riders, flexible premium options, and the ability to adjust coverage as your needs evolve. It’s a smart step toward peace of mind and long-term financial stability for you and your family.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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