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How to secure your family with life insurance?

How to secure your family with life insurance?

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 35.

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 itself. To top it off, 80% are not even aware of the sky-rocketing costs of treatment of 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.

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.

Purchasing life insurance as soon as you start earning is not only cheaper, but 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, the death or maturity proceeds also qualify for tax saving under Section 10(10D).

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 to analyse what suits your needs. Here’s how you can 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 Star Term Plan from Canara HSBC Oriental Bank of Commerce. 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 Star Term Plan, you too can secure your family today.

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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 www.canarahsbclife.com.

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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