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How does Increasing Cover Work in Term Plans in India?

How does Increasing Cover Work in Term Plans in India?

Term Insurance Cover

Online term plans have been gaining popularity among the new-generation in India. In fact, term insurance plans are one of the highest sold financial products online. This popularity is not because of one or two incentives or unavailability of options. It’s just that the best term plans in India offer some amazing features to ensure your family’s financial safety.

One of the latest additions to the features of term insurance plans is the growing term insurance plans. These plans offer you the option to increase the benefit amount without having to buy a new policy every time.

The Need for Growing Term Insurance Cover

Nishtha is just 25 years old right now. She has already started earning and is confident of growth in her career. Being the youngest in her family, she has never felt the need for responsible use of the money, however. Blame it on her doting siblings or parents, but gradually she is realising that the real world outside her family could be slightly different.

As she can now see within the family, as well, after her eldest brother recently tied the knot that responsibilities will only grow in life. Similarly, our responsibilities also grow with us, so does our incomes (read lifestyle) if we are working hard.

Along with responsibilities and incomes the umbrella we build for our families to survive under after emergencies should also grow larger. In simpler terms, as you acquire family and it grows with children, so do your responsibilities of providing them a secure financial future. Therefore, your insurance cover, especially the term insurance cover should also grow.

How Does Your Term Insurance Cover Increase?

There are multiple ways you can keep your term insurance cover growing along with your responsibilities:

  • Buy additional life covers: Buying additional life cover is simple as you can apply for a new term or other life insurance policy with significant growth in your income.
  • Buy a plan with Life-stage increment options: You can simply ask the insurer to increase your sum assured of the policy at certain predefined points in life. However, the policy should have this option at the time of purchase.
  • Get an increasing cover term insurance: Increasing term cover is where your sum assured of the plan automatically grows every year. Here also, you do not need to buy another policy; you will not even have to submit a request for increment.

What Are The Differences?

How to increase your insurance coverage?

When to Select Which?

There are many other factors you should know about each of these options:

  • New Policies: This is something you will automatically end up doing. You can buy a new policy with added life cover at the time of investing in a child’s education and marriage goals. You can also buy additional life cover with pension plans.
  • Life-stage Growth: This is only possible for those buying early or at least right after marriage. As the largest increment occurs at marriage (50%), it makes sense to have this option in the policy if you are buying before marriage.
  • Increasing Term Cover: From the point of view of convenience, this cover is the most comfortable. The sum assured can keep growing automatically every year as your life goes on. But it also does not give you a choice to stop the increments. Unlike in life stage option, where you can avoid increasing your term cover until you get married or plan for a baby.

So, if you already have a family, perhaps this option would be a better choice for you.

Examples of Increments

Since increment is pretty simple and easy to grasp when it comes from buying a new life insurance policy, let’s take the examples of the other two options only.

Assuming you bought a term plan of Rs. 50 lakhs (base sum assured) at the age of 27, while still unmarried. Insurer allows three life-stage increments on this plan:

  • 50% of the base sum assured at Marriage
  • 25% of the base sum assured at 1st childbirth
  • 25% of the base sum assured at 2nd childbirth

Also, since you could buy a term cover of Rs. 50 lakhs at the age of 27, your annual income must have been Rs. 5 Lakhs; i.e. 10 times of annual income.

So, if you ask the insurer for the first life stage increment at the age of 30 after getting married, the insurer will add Rs. 25 lakhs more to your term cover. Provided your annual income is higher than Rs. 7.5 lakhs, thus, increasing your total available cover to Rs. 75 lakhs. Similar rules will apply to the other two increment requests.

Increasing Term Plans in India:

Canara HSBC OBC Life’s iSelect Star term plan offers the increasing life cover feature. The sum assured in this plan grows at a consistent simple rate of 5% every year.

So, if you sign-up for a policy with initial sum assured of Rs. 1 crore, the sum assured will growth to Rs. 1.05 crore next year, and Rs. 1.1 crore the next. It’ll keep growing at 5% of the base sum assured until it reaches the Rs. 2 crores threshold; i.e. double the base sum assured. Hope the examples and feature comparison will help you decide better for your family and their safety.

Speak to an insurance specialist now!

Frequently Asked Questions (FAQs) for Term Insurance Plans

A person can only purchase a term insurance plan till the age of 65 years, and they can choose the risk coverage for up to 99 years of age. One can easily buy the best online term plan between the age of 18 to 65 years.

This being a term insurance 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 65 years of age. This is a term plan with return of premium option – that means all the premiums paid throughout the tenure will be paid back to you if you outlive the policy.

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 when you buy the best term plan in India.

If your key purpose is to give your Family financial protection, go for the best term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan. iSelect Star is a term plan with return of premium option. All the term insurance premium will be paid back to you, if you outlive the policy term.

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, the best term insurance plan pays a part of the sum insured to treat your disease.

Term life insurance plan 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 plan 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 insurance policy remains active until the expiration date.
  • Income Rider: This rider in a term insurance plan 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 insurance 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 the Best Term Insurance Plan?

  1. 1. Are you buying a term plan with return of premium?
  2. 2. Amount of premium you have to pay based on your age, habits, education, and monthly income
  3. 3. The total number of benefits covered in the term insurance plan. Do they include benefits that you care about the most?
  4. 4. How to save money on tax if you pay for the term life insurance plan?
  5. 5. Do they offer regular income options?
  6. 6. Can you change the coverage and premium in the future?
  7. 7. Does the claim consider valid if death occurs outside India?
  8. 8. Which kind of death is not covered by a term insurance plan?
  9. 9. Can NRIs take a term insurance plan? If yes, what are the conditions?
  10. 10. Does the term insurance plan have a cash value if you decide to cancel the term insurance policy?
  11. 11. Under what circumstances can a term insurance plan be cancelled?
  12. 12. Can I pay the premiums online or make electronic payments?
  13. 13. What will happen to the term life insurance plan if the life assured starts smoking after purchasing the policy?
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