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12 features of term policy that will make the nominee's life easier

dateKnowledge Centre Team dateFebruary 26, 2021 views221 Views
12 features of term policy that will make the nominee's life easier

Life is uncertain. There are too many risks like disease, accidents, disabilities, and death, which can put a dent in the emotional and financial aspects of life. In a community, individual financial stability is not attained without savings. If an individual with a family loses financial stability, the whole family suffers. Hence, you need an efficient plan to keep your family financially protected. Term plans are the purest form of life insurance plans that will keep your family safe.

12 Features of a term policy and its benefits

As every investor will stress, you need adequate knowledge about the plans to accurately choose a term plan. Hence, researching the plans should be mandatory. To help you choose the best term plan, here are some features of a term plan that make it a desirable investment option.

1. Affordable

Affordability is the most spectacular feature of a term insurance plan. The best term plan offers life cover for a specified amount known as the sum assured and a specific time known as the policy term. If the nominee dies or gets into an accident with permanent after-effects during the policy term, the death benefits will go to the appointed nominee. The plan is simple and affordable as the insurers have to pay a death benefit only.

Some of the best term life insurance plans pay the family the death benefit and offer them financial security in the event of the death of the breadwinner. It is also the cheapest compared to whole life plans, money back plans, or Unit Linked Insurance Plans (ULIP). Buying a term plan is the best step to financial security and safeguards your family from any debts, loans, and helps maintain the current standard of livelihood.

2. Easy to buy

You can buy a term plan easily, just like you buy clothes or books from online shopping. Buying a term plan is also comparatively easier than buying other types of investment plans and financial arrangements. The framework of a term policy is simple enough that you don't have to be worried about the returns and where the money is invested. To accurately use the plan, you have to appropriately calculate the affordable money as per your financial capabilities, livelihood, and financial problems like debts, loans, etc.

There are two ways to buy a term insurance plan,

a. Offline:

Buying is through a medium, like a broker, insurer, etc.

b. Online:

Buying a term plan online is like online shopping for basic commodities. All you want is a digital screen and an internet connection. Online plans are cheaper than offline plans as there's no hassle involved with documentation. These offer quick processing. The insurance company also saves money as online plans are 5-6% cheaper than their offline counterparts.

3. Flexibility of payment

The policyholder can choose when he/she pays the payment that is due. A term policy can be chosen as annual, semi-annual, quarterly, weekly, or monthly. There are also plans that offer either a single pay or limited premium option apart from regular options. These are the reasons why the pay is flexible as the policyholder would be able to choose payment as per their financial capabilities.

4. Additional riders

Every term insurance plan offers additional riders in case of injury, accident, disease, or disability. These riders come with additional charges and offer extended periods in connection with the main plan. Hence, it is important to take these additional riders into account as per your financial capabilities to ensure maximum coverage and the security of the family and loved ones.

5. Staggered claims payout option

Every term plan offers a lump sum benefit in the event of a death claim benefit. The amount could be large enough that maintaining it will be difficult, or it could be a challenge if the money was invested by the wrong investors or greedy members took the money for granted. In the case of these circumstances, there are term policies that offer a staggered claim payout under which partial claim amount is payable as lump-sum, and the remaining amount could be payable as a monthly/yearly income.

A partial lump-sum amount can help the family in case of financial difficulties arising from the death of an earner, and the monthly income can be used to cover monthly expenses. The option to choose the staggered claims payout can be made at the inception of the policy. The best term plan also allows the nominees the flexibility to choose the entire claim amount as a lump sum for a discounted rate even if the life insured had chosen the option of staggered life insurance.

Several insurance companies offer the best term plan with an option to choose from the lump-sum payout, monthly income, or a combination of both. Your beneficiary will receive the amount as equal monthly installments, securing their lifestyle and livelihood even after your time.

6. No capital build-up

Term life insurance doesn't accumulate wealth as a universal policy would. It goes directly to compensation of life insurance if the unthinkable happens. If you stop making premium payments or if the policy matures (reaches its end of term), you will be left with zero capital. Premiums would be used purely for the death benefit.

7. Pay the policy premium till retirement

You can choose a term policy that requires you to get covered till age eighty-five but pay premiums only till age sixty-five. In other words, you need not pay for the entire tenure of the policy but pay only when you are working. Therefore, to get the benefit, you must choose a term policy with a premium payment option that falls within your retirement age and follows your retirement plan.

The benefit of a plan with this feature is that you will not have to worry about the premium payment after retirement when the regular income stops. Even after you retire, the term policy will protect your family member's financial situation. Hence, this is a useful feature to ensure your family's future. However, make sure to ask your insurer about its details.

8. Fixed coverage amount

Term life insurance can be purchased with varying amounts, ranging from thousands to lakhs. The amount of coverage desired affects the size of the annual premium as companies could easily charge policyholders Rs. 1000 per coverage.

But with a term policy, when a coverage amount is set, it cannot be increased or decreased. But it is not a problem if you can accurately estimate the amount as per the term policy and use it for your benefit. Therefore, you should research and ask for advice from your insurer.

9. Increasing premiums

Many term plans premiums increase each year. Also, all insurance has the problem of rising mortality charges. Hence, a permanent term policy averages out later premiums with former ones, which will allow funders to pay annually with the policy of their choosing. As such, make sure to have a discussion with your insurer and take care to know all about your premium charges and benefits.

10. Non-working spouse coverage

The best term plan would have a feature that will allow you to add in your spouse as the beneficiary in your plan. Make sure to choose this plan as it will allow the benefits of the plan to reach your family and safeguard them against any financial troubles in the event of an unfortunate event. Hence, make sure to have a discussion with your insurer. Get advice from your family members, as the financial situation concerns them too.

11. Increasing/decreasing life cover

Term policy at Canara HSBC Oriental Bank of Commerce Life Insurance will allow you to increase or decrease your life cover at different stages of life as you grow responsibly. It also gives you the flexibility to change and adapt your policy as per your financial situation and livelihood. When you choose a term insurance plan, make sure to take your responsibilities into consideration.

12. Temporary coverage

Term policy coverage is basically for short periods of time. It can cover up to thirty years. Temporary coverage means lower start-up premiums. Therefore, as stated previously, make sure to discuss with your insurer and take care to know about the features a specific policy has.

These features are generalized for a variety of term policies and are the basic ones any term policy should have. Many insurance companies have additional benefits along with these. So make sure to research properly and take care of the details with your insurer. Canara HSBC Oriental Bank of Commerce Life Insurance offers a variety of term policy options like the iSelect Star Term Plan that are designed to keep you and your family protected when you are no longer around to provide for them.

Choose wisely, live well.

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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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