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How to Select the Best Term Insurance Plan for the Tough Times of Life?

dateKnowledge Centre Team dateDecember 05, 2020 views89 Views
How to Select the Best Term Insurance Plan for the Tough Times of Life?

Term life insurance has been catching up to the public imagination. Developments of the year 2020 have also pushed more people to consider the term insurance cover. So much so, that the insurance regulator in India, IRDA, has proposed a standard term insurance plan to be provided by all insurers.

While term insurance covers the loss of life of the family’s breadwinner, it is but only one of many hardships a family may face. Fortunately, you have the option of buying term insurance which will do a lot more than just cover death.

However, before you go on to explore the ocean of life insurance for that perfect term insurance plan, you should know what you are looking for. Here are five simple steps you can follow to find or build a term insurance plan suited to your needs.

Define Your Tough Times

Term insurance coverage is a part of your contingency planning. So, if you want your term plan to cover maximum corners during the tough times for your family, you need to paint the bigger picture first.

You should try answering the following three questions, in the same order, for your contingency planning:

1. What incidents may cause hardships to you or your family?

(For example, sudden illness, accidental hospitalization, job loss, disability, natural calamities, death, etc.)

2. Which of these incidents are not in your control?

(For example, you may have some control over your professional growth and employment, but not on a possible road accident.)

3. Which of these uncontrolled events would lead to financial hardships?

(For example, job loss, a slowdown in business could be temporary and your expenses do not exceed the normal living cost. However, with an illness, you have to incur additional costs like hospital and treatment bills.)

Insurance can cover or at least reduce the cost of most events which will cause an additional financial burden on your family.

Thus, how many of these events can term insurance take care of for you?

Look for Additional Covers

Apart from death, you have many other risks where you and your family may need financial support. Thus, you will need to look for additional covers along with the term insurance plan. The most important of these are the following:

  • Sudden Illness
  • Accidental hospitalization
  • Temporary and permanent disability
  • Death of homemaker spouse

Death is the primary cause of existence for a term life insurance, but you can add benefits to cover the other events as well. Here are the benefits you can add to your basic term insurance cover:

  • Cover for life-threatening diseases such as cancer, cardiac arrest, renal failure etc.
  • Physical Disability: you can seek to waive off all future premiums for the life cover in case of contracting total and permanent physical disability.
  • Accidental death: Accidental death can cause an additional financial burden on your dependents with legal procedures and hospital bills. You can add this benefit to increase the sum assured for the family in case of accidental death.
  • Spouse Cover: You can add your spouse to your term life cover and extend the umbrella on her life as well.

Few term plans, including iSelect Star term plan from Canara HSBC OBC life, offer all these four benefits under the same plan.

Reduce the Investment Burden on Your Family

Every family needs a combination of two things to live and do well financially in the long run – regular income and lump sum corpus. Regular income helps in running the household and maintaining the lifestyle. The lump-sum corpus is needed to see off the financial goals.

While a term insurance plan may help your family financially in case of a mishap, it may leave your survivors dizzy with the financial burden. Imagine suddenly receiving a huge sum of money in your bank account with an assurance that there will be no future receipts.

Managing a huge sum of money to survive and meet multiple financial goals, in the long run, could be a task even for the expert fund managers. Expecting your dependents to suddenly become better than most wealth management experts would be unrealistic.

Add Income Option to Your Term Insurance

Also, the only way for the family to generate a consistent monthly income safely for a long period is through life insurance. But, what if your term insurance policy pays the death benefit in the form of monthly income?

Your nominees would only need to take care of putting the lump sum money into paying off debts and putting into long-term investments for future goals.

Add Growing Monthly Income Option

With plans like iSelect Star, you can even ensure a growing monthly income for the family. Thus, keeping them from having to compromise their lifestyle in the future.

Check Claim Settlement Process

Claim settlement is the ultimate indicator of the usefulness of term insurance. You do not want your family members to face hardships in claiming the one benefit necessary for their survival.

Claim settlement process of a life insurer involves multiple factors which can help you judge the efficiency of it:

  • Availability of online support channels
  • Fast claim settlement options
  • Claim settlement support process
  • Claim settlement ratio

The best life insurers will have a claim settlement ratio of higher than 95%. However, that’s not all. Claim settlement ratio only gives a partial picture. To know the claim settlement experience with the insurer, you need to look for the instant claim settlement policies.

For example, Canara HSBC OBC Life has a claim settlement program named ‘InstaPromise’ which provides the conditions for one-day claim settlement. Such processes can take away a lot of stress from your survivors.

Pay The Premiums Within a Short Time

Last but another very useful feature with a term insurance plan is the possibility of paying off all the premiums in a short period, or even in a single instalment. This option allows you to stay stress-free about continuing your life cover during other exigencies such as low income or job loss.

However, you should be careful while choosing these options, as they often put some limitations on other benefits of the term plan. However, if your income is variable limited pay option could be a good choice for you.

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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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