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5 Mind-Blowing Facts About Term Plans In India

dateKnowledge Centre Team dateJanuary 13, 2021 views147 Views
5 Mind-Blowing Facts About Term Plans In India

Term insurance plans are the purest forms of life insurance. This insurance plan is one of the most basic financial needs for anyone having an income and a family. Term plan fulfils one of the primary needs in your life – financial safety.

More than that, term insurance costs are nominal. So, it should not hurt your budget at all if you secure the cover in time. Even then the premiums you pay, also make you eligible for tax benefit u/s 80C.

However, term insurance features are not limited to low premium and tax advantages. Here are five mind-blowing facts of term insurance plans in India:

Buying Term Insurance is Easy as Online Shopping

Now you can buy term insurance cover simply in a few clicks on your computer, from the comfort of your couch or office. We can simplify the online purchase process in the following four steps:

  • The online calculator will estimate the amount of term cover you should have based on your income and age.
  • Select your additional benefits and premium payment mode for the policy
  • Complete the application form
  • Go for medical check-up

The online mechanism should help you assess how much money your family would need if you were to meet with an untimely death. This amount is usually 10 to 15 times of your annual take-home income, and will cover the following:

  • Your family’s lifestyle and household expenses (or living expenses)
  • Future financial goals of your children
  • Retirement funds for your spouse
  • The current home loan balance

Any additional liabilities you can add to this amount so that they are also covered by the term insurance.

If you have an existing medical condition, the insurer may charge a higher premium from you. Usually, they will ask for the balance amount before approving the policy. The only case insurers ask for an additional premium is if the medical condition adds to the risk of your early demise.

Thus, do not postpone the decision because of this, as your family need the cover even more in this case.

Built-in Riders for Critical Illnesses

Critical illnesses are life-threatening illnesses with unpredictable progress rates. For example cancer, heart attack, renal failure, major organ failure and paralytic stroke, etc. While many of these illnesses do have treatments, there are three major risks:

  • Life of the patient may change dramatically even after the treatment
  • The cost of treatment could be exorbitant
  • Your earning capacity may remain crippled or diminished during the course of treatment

Thus, it’s important to have a plan for the financial safety of the family and their life goals in these situations.

Traditionally you could add critical health insurance as a rider to either your term life insurance or Mediclaim insurance. However, the best life insurers are now providing plans like iSelect Star term plan, which fuses the critical cover with the life cover.

One Day Claim Settlement

Claim settlement is the ultimate point of user experience for term life insurance. You wouldn’t want your family facing the duress of trying to secure the benefit from your term policy.

Your term insurance may be the only financial support they have to fall to for the rest of their life. So, you want their claim settlement experience to be smooth and quick.

Thus, the best life insurance companies have improved their claim settlement process to the extent where they can settle the claim within one working day. Two common conditions for one-day settlement of death claim are:

  • The policy has been continuously running for more than three years, without lapses in premium payment
  • The benefit pay-out is less than Rs 1 crore

If your policy meets these criteria at the time of claim, your family is likely to receive the benefit within a day of filing the necessary documents. Even in the cases where your sum assured is higher, the waiting period may not exceed five working days.

Thus, the speed of claim settlement for today’s best life insurers makes it easier for your dependents to depend on the life cover.

Dedicated Claim Officers

While the claim settlement process has improved families may find the maze of paperwork and communication difficult. To counter this challenge and make your nominees feel at ease insurers like Canara HSBC Oriental Bank of Commerce Life Insurance assign claim settlement officers.

These officers work like your bank’s relationship manager and help your family file the claim with correct documents. They are responsible for correct filing and fast settlement of the claim.

Thus, the insurers offer handholding for the grieving families while they try to secure their lives financially.

Low Insurance Coverage In India

Despite all the features, advantages and ease of availability, India remains one of the countries with the lowest per capita life insurance cover. Surprisingly, lack of awareness does not feature as the prominent reasons for this fact. Instead, the following two factors are most common:

  • Lack of budgeting for life insurance in the household
  • Lack of understanding of the long-term benefits of adequate life cover

The second one sounds more interesting because it means that Indian households are unable to assign the right priority to life cover. Thus, not budgeting for the life insurance premium in their monthly expenses.

Term Life Insurance – A Primary Financial Need

Term life insurance is not a lifestyle expense. This investment is as important as using doors and locks in your house. Whenever you go out you put a lock at the door to protect your house from unwanted elements. Keeping your house safe and maintaining the house so that everyone inside also stays safe is one of your family’s basic needs.

Similarly in the financial world, term life insurance is your basic need, which should find a place in your monthly budget before any other investment. Also, if you are finding your life cover premiums too high to bear, perhaps you have opted for an investment option along with the life cover.

Although this is a good long-term investment choice, the life cover under this option will only cover the investment goal. Term insurance on the other hand can cover for multiple financial needs and goals at a nominal cost.

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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 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?
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