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|
|Child School fee||5000|
|Children's Future Goals|
|Retirement & Other Goals||12,000|
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 Smart360 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 Smart360 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 Smart360 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.