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What is Increasing Coverage Option In Term Insurance?

dateKnowledge Centre Team dateDecember 08, 2020 views134 Views
What is Increasing Coverage Option In Term Insurance?

Insurance is a wise man’s decision. Life is quite unpredictable, and insurance allows people to provide immediate support to a person’s dependents in case of their sudden death. Realising the significance of having insurance, the market is flooded with various types of insurance plans. Term Insurance is one such type of life insurance policy.

What is a Term Insurance?

Term Insurance is the type of life insurance policy that is valid for a specified time frame generally referred to as “term”. This means that the policy provides coverage or death benefit if the policyholder dies in the period specified within the policy.

With many life insurance policies available within the market, the question of why choose “Term Insurance” over other policies may arise in the minds of potential policyholders. To relieve the people from this dilemma, listed below are the benefits of a Term Insurance plan;

  • Term Insurances are less expensive than Permanent Life Insurance policies since they provide death benefit instead of cash benefit.
  • Provides policyholders with the freedom of choosing the term, indirectly the premium amount and sum assured based on their financial goals and capacities.
  • To keep up with life’s changing dynamics, Term Insurance policies provide an option for increasing coverage within the term period.

What is the “increasing coverage” option available with Term Insurance?

At different stages of life, the life goals of a person change. Not only goals, but a person’s financial status is sensitive to various external factors like age, inflation, lifestyle and healthcare expenses. Hence it is highly advantageous if the premium amount and sum assured of an insurance policy suits the current financial capabilities and the future financial needs of a policyholder. This is the idea behind the Increasing Coverage option in a Term Insurance policy.

In an increasing term insurance plan, the sum assured increases by a predefined amount every year until completing the policy term. Generally, all insurance policies have an option to extend or renew a policy after the completion of its term. But the new premiums will be dependent on the person’s age and health at the time of the renewal. It may cause the new premium values to be higher or impose limitations on other benefits. These restraints can be avoided if one chooses an increasing term insurance plan.

Benefits of increasing coverage option in a term insurance plan

  • The premium in a term insurance plan generally remains constant. In case of an increasing term insurance plan, the premiums may increase according to the increased death benefit. But this gives the policyholder the advantage of paying a lower premium early on in life to adjust to their financial conditions.
  • The benefit of the increasing term insurance plan can match inflation in the market. Thus the policyholder can rest assured that their family will survive the increasing financial needs even in their absence.

Thus increasing term insurance policy can adjust to the different financial conditions at different stages in life, giving the policyholders a chance to keep up with the economic dynamics.

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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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