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Do You Need a Whole Life Plan or Is Term Life Cover Enough?

dateKnowledge Centre Team dateJanuary 13, 2021 views190 Views
Do You Need a Whole Life Plan or Is Term Life Cover Enough?

Term life cover is the first thing you need the moment you start to shoulder financial responsibilities. However, nowadays simple term insurance plans can offer so many optional features that you end up wondering if you could get a better deal.

So, here’s one such option which you should consider if it suits your interest and pockets – whole life term plan.

What is a Whole Life Term Plan?

A whole life term plan is a variation of the standard term plan with an extended life cover tenure. Ideally, a term life cover should last only until you retire from active work. In other words, after you stop working to earn money and have saved enough to lean on your savings you do not need term life cover.

Term Cover till 60 vs Term Cover till 99

However, at the retirement age (usu. 60) a standard term life cover may leave you wondering where all those premiums went. Whole life term cover offers you more than just a life cover during your working years.

Whole life term plans like iSelect Star from Canara HSBC Oriental Bank of Commerce Life Insurance, last up to 99 years of your age. Meaning, this plan will cover your natural death as well. It also means that you can leave a legacy for your grandchildren with the help of this policy.

One major difference between a term life cover and whole life term cover is the tenure of cover.

Cost of Cover

The premium cost of whole life term cover is definitely higher than the cost of standard term cover. That is why two things are very important in this regard:

  • You must start early with this plan to secure lower premiums
  • You should divide your total life cover need into two parts between standard cover and whole life cover

This way, you can maintain adequate life cover for yourself at a lower cost and still meet your goal of leaving a legacy for the next generation.

Premium Payment Tenure

While you can pay the premiums for a standard term life plan throughout the tenure of the policy, with whole life plan you would want to do differently. You should opt for ‘pay till 60’ option for premiums in case of a whole life term plan.

This will ensure that you don’t have to bear the burden of additional expenses after retirement.

How Does Whole Life Term Work?

Whole life term insurance plan works almost in the same manner as a normal term insurance plan. However, there are minor changes based on the differences in the conditions.

Here’s how the whole life term plan option of iSelect Star Term Plan from Canara HSBC Oriental Bank of Commerce Life Insurance would work:

  • Divide Your Life Cover Need: You can choose your total cover amount under this option. Remember that this option will pay the benefit amount in a lump sum. Thus, it is important that you divide your total life cover need between whole life and standard term plan.
  • For example, if your annual take-home income is Rs. 10 lakhs, your minimum life cover need is about Rs. 1 crore. You should secure a standard term cover till the age of 60 (or expected retirement) of Rs. 50 lakhs and get a whole life cover of Rs. 50 lakhs.

    This way you can convert at least 50% of your total life cover into a regular income for your family in the case of your early demise. Meanwhile, the whole life term plan would fulfil the need for a lump sum payment.

  • Pay the Premiums in Monthly Mode: If you are salaried, monthly mode of payment would be much better for you. Otherwise, you can choose any other mode you are more comfortable for premium payments.
  • In the Case of Early Demise: In case of your death before 60, the standard term policy will start to pay a monthly income to your family. The whole life plan will also pay the benefit amount of Rs. 50 lakhs as lump sum payment.

    The same benefit will also apply if you are diagnosed with one of the covered critical ailments, for example, cancer, heart failure, etc.

  • In Case You Attain 60 Years Of Age: Your standard term life cover will expire. The whole life cover will continue. However, you will not need to pay any additional premiums for the Rs. 50 Lakhs life and critical illness cover.
  • Upon Death or Diagnosis of Critical Illness after 60: The whole life plan will pay the sum assured amount to you or your nominees and cease to exist.
  • Upon Attaining the Age of 99: At the age of 99, if you survive the term, the policy pays the sum assured to you.

You can also choose the option to receive all your premiums back at the age of 60, and still have the life cover continue till the age of 99.

Ways of Planning Your Legacy

You can easily leave more than just money as a legacy for the next generations. However, wealth adds to the sweetness of it further. However, regardless of which legacy you wish to leave you to need to start sooner than later.

With wealth legacy, you can either wait to do big and then put aside a sum for your grandchildren. Or you can start early, secure the goal with a life insurance plan and continue building everything else on the way.

The path of insurance is obviously much safer and requires far less attention from you than the investment mode. Additionally, you can kill two crows with one shot:

  • Provide adequate financial safety to your family during your working years
  • Leave a legacy effortlessly for the next generations

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Frequently Asked Questions (FAQs) for Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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