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Does Your Term Insurance Have These Three Benefits?

dateKnowledge Centre Team dateMarch 23, 2021 views121 Views
Does Your Term Insurance Have These Three Benefits?

We generally buy term insurance plans for the benefit of our loved ones, to protect them financially in case of our untimely demise. However, there is more to resolving their life without you than just offering them a large sum of money. Then there are circumstances where you may not lose your life but your ability to earn.

Should your family suffer financial hardships because of such mishaps? Not if your term insurance has the following three features:

1. Secure Monthly Income for the Family

A family has two types of financial needs, one about regular needs necessary to live, and two about larger life goals in the future. While you are there to provide for both, you give part of your income towards the regular household budget and save the rest for the future.

Even if you have an income which is defined annually, you will need some money every month for your regular expenses. In the absence of your better judgement, your family members may find it difficult to use the large life insurance money for running the household.

Thus, you need your term insurance plan to provide not only a lump sum amount but also a regular sum of money paid every month in the case of your untimely demise. Term plans come with an option for regular monthly payout and a lump sum payout. Choose the mode of payout according to your requirements.

Ensure Inflation-Adjusted Income

Discounting inflation in your regular expenses would either mean a diminishing lifestyle or deflating costs. Both the situations are undesirable and opposite of the normal trend. Thus, it’s better to have an inflation-adjusted income instead of a fixed one.

The best term insurance plans including iSelect Star from Canara HSBC Oriental Bank of Commerce Life Insurance, allows you to ensure such an income to your family after your untimely demise. All you need to do is to divide your total policy sum assured into:

  • Payable in lump sum amount
  • Payable as regular income amount

For example, if you are buying a term cover of Rs. 2 crores, you can divide the sum assured in 50:50 ratio between the two. Thus, your family will receive:

  • Rs. 1 crore as a lump sum payment
  • Approximately Rs. 71,000 per month as regular income which will grow at 10% simple rate every year.

Thus, you can relieve your dependents from the burden of investing the large sum of money for their regular financial needs. With the inflation-adjusted income, you also ensure that they don’t have to compromise on their lifestyle in the future.

2. Life Cover for Homemaker Spouse

Can homemakers who may not have a direct income have term insurance cover? Or the larger question, ‘should they have a life insurance cover?’ The short answer is, yes, and the reason for that is because their contribution to the family does have strong financial backing. Consider the table below:

Monthly Budget With Homemaker Monthly Budget With Homemaker Additional
Exp. Without Homemaker
Kitchen inc. house help 15,000 Cooking & House. Help 10,000
Commutation 3000 Driver & Cabs 5000
EMIs 30,000 Coaching & Dev. For Child. 7000
Health Insurance Prem. 2000 Childcare 5000
Medical 1,000
Child School fee 5000
School Activities 2,000
Children's Future Goals
Higher Ed. 15,000
Marriage 15,000
Retirement & Other Goals 12,000
Total 1,00,000 Additional Cost 27,000
Table: Family budget with and without the homemaker

The table shows a sample budget for a family with a couple and a child. The family will need to spend additional money on looking after the children and household chores. This number can be used to indicate a direct financial impact of homemaker’s presence in the family.

The homemaker in the example above should have a term life cover of about Rs. 40 lakhs. This amount will enable the family to meet the additional expenses in her absence.

Canara HSBC Oriental Bank of Commerce Life Insurance’s iSelect Star term plan lets you hold the term policy jointly with your homemaker spouse. The best part about the joint-life cover is that if either spouse passes early the life cover of the surviving spouse continues without the need for additional premiums. This feature will be very useful in case your spouse is a homemaker.

3. Premium Waiver in case of Accidental Disability

While untimely death of the primary breadwinner is a serious cause of financial distress to families, it’s not the only one. Critical illnesses like cancer have been notoriously famous for pushing well to do families below the line of poverty. Similarly, loss of ability to perform your normal tasks and earn an income can also pose a serious threat to your family’s wellbeing.

Thus, your term insurance plan should have the option for you to have some financial assistance in case of severe permanent disability. iSelect Star term plan, for example, offers two benefits in case of permanent severe disabilities:

  • Waiver of premium for the life cover
  • An additional sum payable to you to help you continue supporting your family

The iSelect Star term plan has a critical illness cover as an automatic benefit. So, you do not need to add a critical illness cover. However, you can add these three critical covers for a nominal premium cost. These three benefits will add more value to your term life cover and provide enhanced financial security to them.

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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 a 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?
  9. 9. Does the term insurance plan have a cash value if you decide to cancel the policy?
  10. 10. Under what circumstances can a term insurance plan be cancelled?
  11. 11. Can I pay the premiums online or make electronic payments?
  12. 12. What will happen to the term plan if the life assured starts smoking after purchasing the policy?
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