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How Does Canara's Online Term Plan Work

Online Term Insurance

Canara HSBC Life’s online term plan, iSelect Star is one of the term plans which offer comprehensive coverage and numerous benefits. It is important for you to understand how these benefits will come to impact yours or your family’s life.

Thus, if you know how the plan works before buying, you can make better choices with the plan and make it work for your future needs.

The Two Parts to the Term Insurance

Any life insurance contract (investment), including the online term plan, has two phases of activities:

  • Policy Purchase
  • Claim Events

The policy purchase phase starts with your first application for the policy and continues until the claim event on the policy. Although, going by the process we go through the ‘policy purchase’ phase first, and only then claim events. But, to ensure that the policy works as per your needs you should understand the claim events first.

The claim events define the moment of truth for your life insurance investment. So, it’s important that you understand what defines a claim event for the insurance plan you are getting into.

More importantly, claim events are your needs. Thus, understanding your needs first will enable you to make better purchase decisions.

Identifying Your Claim Needs

With iSelect Smart360 Term Plan, you can expect to meet the following claim needs:

  • Untimely Demise
  • Diagnosis of Life-threatening illness
  • Accidental Disability
  • Life cover for spouse

You can also call these as the primary needs you’d want your insurance plan to meet. In all the four events your family will need two kinds of financial support:

  • A large sum to look after treatment expenses, home modification, etc.
  • A regular income to run the household expenses

Also, if you are an early investor you may want these benefits (sum assured) to grow as your family and income grows. iSelect Smart360 Term Plan gives you two options to increase your benefit amounts as per your growth:

  • Life Stage Growth: Choose a level sum assured in the beginning, then you can increase the cover at three important life events – marriage, 1st childbirth, 2nd childbirth.

  • Example: You buy i-Select Star term cover at the age of 30 while still a bachelor, with a sum assured of Rs. 1 Crore. Three years later you get married. Now, if you want to increase your life cover, you can simply increase the cover in your existing plan instead of buying a new one.
    With i-Select Star you can increase your S.A. by up to 50% on marriage. So, your new life cover after marriage will be Rs. 1.5 crore. Similarly, you can again increase the cover by 25% each on childbirth for up to two children.
  • Increasing Cover: The sum assured keeps on growing at a fixed rate every year until it doubles. The growth is based on simple interest.

Why Regular income?

Providing a source of regular income to your family takes away a large burden of investing money from over their heads. It also, ensures that they don’t worry about their immediate basic needs and can focus on bigger life goals.

In short, fix their survival to help them thrive.

Additional Needs & Benefits in the iSelect Star Plan

While all the three basic needs are part of i-Select Star term plan, there are additional benefits you can use:

  • Leave a legacy in case of natural death
  • Receive all the paid premiums at maturity (survival benefit)
  • Receive all paid premiums as survival benefit and leave a legacy on natural death
  • Receive child support benefit

Selecting the Benefits in iSelect Smart360 Term Plan

Now that you have identified most of your needs, let’s see how you can go on selecting these. Before we go ahead, it important to note that you need to select most of the benefits at the time of purchase. Your choices at the time of buying will define your future options.

Step 1: Selecting the Death Benefit & Check Premium Cost

  • Death benefit should be 10 to 15 times of your annual take-home income
  • The shorter the premium payment term (PPT) the higher your annual premiums will be. So, make sure it stays within your budget
  • You can also select a single premium option. But it may reduce the number of benefits you can add to your policy

Step 2: Select the Type of Cover You Want

  • You can choose a level sum assured. You will have the option to increase the sum assured at an extra premium at specific events in your life – marriage and childbirth
  • Choose an increasing cover. The policy sum assured will keep growing at 5% simple interest every year. It can grow until it doubles or till a claim occurs.
  • Chose a decreasing cover. The S.A. will stay the same till the age of 60. Once you attain 60 years of age the S.A. of the policy decreases at 5% simple interest until it remains 50% of the original S.A.

If you choose a decreasing cover option in this step, you will not have the option to add other insurance covers in the next step.

Step 3: Add More Insurance Covers

In this step you have four options:

  • Accidental Death: Your family can receive an additional sum assured in case of death in accident
  • Accidental Disability Sum Assured: Your family will receive a sum assured in case of permanent disabilities due to an accident. Also, your remaining premium on the policy are waived off and the other covers including death benefit continue as usual.
  • Accidental Disability only Premium Waiver: You can leave the added sum assured out and only opt for a premium waiver.
  • Child Support Benefit: Child support benefit is an additional sum assured you can add to your plan. Your family can receive this benefit with death, or a critical illness claim.

Step 4: Add a Cover for Spouse

  • You can add your homemaker spouse as well under the same plan
  • Choose a sum assured for the spouse (Maximum S.A. for a homemaker is Rs. 25 lakhs)

Step 5: Select a Claim Pay Out Mode

  • You can select either lump sum, monthly income or a mix of both at this stage
  • As we had discovered that the family will need both lump sum and regular income, it’s better to divide the benefit amount between both

Regular Income Pay-out Options:

  • Family can receive a fixed regular income. For example, Rs. 50,000 per month
  • Family can receive a growing monthly income. For example, Rs. 45,000 per month for the first year, Rs. 47,000 in the next and so on

Tenure for the regular income: Regular income from the plan will continue for a limited period only. Here you have two choices:

  • 120 months
  • 40 years or till the end of policy term, whichever ends first

Is it Possible to Know the Income Amount?

Yes, it is very much possible to calculate the income amount beforehand. Here’s how you can:

If you chose a level (fixed) income option.

  • The income will stay the same throughout the payment tenure
  • The income factor is 10.09 per 1000 S.A.

Example: If you have chosen to turn 50% of your Rs. 1 crore life insurance into regular income. Your SA for regular income would be Rs. 50 lakhs. The monthly income from this sum assured would be Rs. 50,450 (=50 Lakh x 10.09 1000)

If you choose a 5% growing income

  • The income will grow by 5% simple interest every year
  • The income factor is 8.34 per 1000 S.A.

Example: If you want a growing income on Rs. 50 lakhs S.A. as in the previous example. Your family’s monthly income would be Rs. 41,700 for the first year, and Rs. 43,785 in the next and will keep growing by Rs. 2085 (5% of Rs. 41,700) every year.

If you choose a 10% growing income

  • The income will grow by 10% simple interest every year
  • The income factor is 7.11 per 1000 S.A.

Example: If you want a growing income on Rs. 50 lakhs S.A. as in the previous example. Your family’s monthly income would be Rs. 35,555 for the first year, and Rs. 39,105 in the next and will keep growing by Rs. 3555 (10% of Rs. 35,555) every year.

Choosing Return of Premium Option

If you want to receive all the premiums you have paid for the life cover at the time of maturity, you can choose the return of premium option. There are two options available with return of premium benefit:

  • Only return of premium: The insurer will return all the paid premiums and policy terminates at the expiry of the policy tenure
  • Return of Premium with Whole Life Cover: Here you will not only get the premiums back at the age of 60, but your life cover will also continue till the age of 99, or your demise. You will not need to pay any premiums after the age of 60.

Choosing Whole Life Cover

Whole life cover option may sound attractive, as the claim pay-out is certain even in case of natural death in old age. However, with whole life option, the additional riders are not available with the plan. Also, you do not get the regular income pay-out option for claims after the age of 60. The insurer will pay only a lump sum amount to the family.

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