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Why do you need term insurance coverage?

dateKnowledge Centre Team dateFebruary 05, 2021 views115 Views
Why do you need term insurance coverage?

It is now that people have started realizing the necessity of having a life insurance cover. Earlier, getting a term insurance coverage was the last thing people had in their minds. The common idea used to be – youth does not need to worry about things like life insurance, these are the things that the elders should take care of, etc. But, it has been seen frequently that the one who cares about their future first, stays happy till the last; as nobody has an idea about what is coming next.

There are various benefits of having term insurance from an early age, suppose if you buy a term plan at an early age, the premium would be lower than when you buy it when you are aged. Moreover, you would be able to avail coverage from an early age and create financial security and stability for your family without any delay. Since you are buying the plan young, you would also be free from medical complications, and thus the policy would be issued instantly and at low-priced premiums. In the end, you would also be able to lower your tax liability as the premiums that you would pay would be allowed as a tax-free deduction from your salary. Hence it is clear that you would eventually get profits from all the corners.

A Term Life Insurance Plan is nothing but a life insurance policy which provides a person's family with death benefits, particularly through cash if the insured passes away during the term of the plan and thus, saves the family from financial instability and losses, which would have been the case earlier without any insurance. The company calculates the premium for the insurance policy based on several factors such as:

  • Age of the person
  • Gender of the person
  • Alcoholic or non-alcoholic
  • Yearly income of the person
  • Medical test reports and diseases report

The term insurance premium indicates the money amount that the insurance company has to bear to ensure the life of the policyholder.

The Canara HSBC Oriental Bank Of Commerce Life Insurance is possibly the best life insurance available in the market in today's time. It is one of the most widely recognized term insurance companies in India.

The top benefits that term insurance coverage provides are as follows :

Financial stability to the family -

This is the most popularly-known reason people why take insurance, whether life insurance, property insurance or health insurance and rightfully so. The death of the head of the family or any other bread-earning member can turn the remaining family members' lives in a puzzle. Term life insurance provides the complete sum assured at the time of death and makes the life of the remaining family members easier and better, though only in the financial terms.

Protecting the family's future -

Every family member has some responsibilities and obligations towards their respective family members, whether their parents, husband/wife or children. Death can effectively stop a person from meeting those obligations and completing his/her duties. With term life insurance plans, one can plan his/her future accordingly. In the event of an individual's death, the insurance company's payment ensures that their children will get a good education and have funds for their marriage and other future needs.

Similarly, with the right term insurance plan, one's ménage can also have a comfortable life without facing any financial hardships later. Also, suppose one does not have any other assets to pass to their heirs. In that case, he/she can create an inheritance by buying a life insurance policy and naming them as beneficiaries. This is eventually a great way to set your kids up for a solid financial future and provide any monetary needs that will arise later.

Paying off the debts -

Usually enough, almost every individual certainly has some or the other loans. It could be a property loan, home loan, personal loan or an education loan. The proceeds from the insurance pay off an individual's loans and interest and ensure that the burden of these things does not fall upon his/her family.

Not to mention, having life insurance coverage might bring an individual and his/her family's peace of mind. It is one of the things and can be sure of and would no longer have to question and worry about whether his/her family will be taken care of when you are not anymore. Life insurance protects a person's heirs from unknown bad situations and helps them through an otherwise difficult time of loss.

Massive Coverage, Low Premiums -

Due to the absence of benefits and other various complexities, the term insurance plans provide high coverage at usually low premiums affordable to most subjects. Suppose a person buys life insurance plans online. In that case, the premium rates are lower due to the absence of agents and mediators, which are there during the usual and orthodox offline steps.

For example, suppose a critical illness rider is opted for and the policyholder is diagnosed with one of the specified illnesses. In that case, he will receive a payout for meeting the condition covered under the rider. Like the base policy benefit, the rider benefit must be decided at the inception of the policy, which thereby, fixes the minimum or maximum coverage term and benefits of the rider.

Fixed insurance premium –

Once the term insurance company accepts an individual's policy against a particular premium, it will never revise or change the premium during the policy term; in any case whatsoever. Therefore, you can rest assured of paying a fixed amount annually without any further increase in future. The taxes are payable on the premium as per the government of India's prevailing tax laws. Life insurance policies also protect the economical-related future of one's dependents. Hence there cannot be any compromise on the quantum of life insurance an individual takes. Through term insurance, a person can also get the opportunity to be adequately insured, and at the same time pay nominal premiums compared to other life insurance products that he/she opts for.

Coverage for Terminal Illnesses -

The Term insurance plans can give individual lump-sum payouts in diagnosing terminal illnesses such as AIDS, etc. These prove to be very beneficial for common families who would not have covered up for them otherwise.

Income Tax Benefits –

Regarding premium paid, a person's claim for term insurance coverage also avails a deduction of up to Rupees 150,000 per annum under Section 80C of the Income Tax Act 1961. Also, the death benefits paid to the nominee (in case of unfortunate death) is tax-free under Section 10 (10D) of the Income Tax Act 1961. A few particulars in relation are as follows:-

a. For the term insurance policies issued before the 31st of March 2012, the benefit is applicable if the premium paid is up to 20% of the sum assured by the company.

b. For the term insurance policies issued after the 1st of April 2012, the benefit is applicable if the premium is up to 10% of the sum assured by the company.

Easy and safe to buy –

Buying a term plan is certainly one of the easiest things in today's world. Anyone can compare the premium of various term plans and choose the plan that perfectly suits the individual. For this, a person can visit the respective company's website and buy the term plan in a few easy steps and get insured.

Not to forget, term plans bought online are cheaper than regular term plans which are bought through company offices or agents.

Additional Riders -

The Canara HSBC Oriental Bank Of Commerce Life Insurance also offers some additional benefits, known as riders, along with death cover to the insured. A rider is an insurance policy provision that adds benefits to or amends the terms of a basic insurance policy. One can choose riders like accidental coverage, critical illness coverage, the return of premium, that is, anything that feels suitable for the particular individual at a little extra premium cost. These riders also ensure that the person gets the maximum benefits of life cover without wasting a huge sum of money.

A must-have for high-risk jobs -

Life insurance companies also consider the occupation of the person claiming to get insured. But, if the person works in a dangerous or high-risk environment, he/she has a greater chance of dying than someone else whose job is to sit at a desk and work all day. High-risk jobs include army, aviation, construction, police, firefighting, mining, oil and natural gas, and a few others. Due to these factors, a person doing these jobs has to pay a higher premium than the ordinary ones. But, one must also opt for an insurance policy while doing such a job, as it is worth it if something goes wrong, though unexpectedly.

The Canara HSBC Oriental Bank of Commerce Life Insurance Company had reported a profit of Rupees 105 crore in the fiscal year 2019-20 on the back of a 7% growth in new business premium, proving it's capability and showings why it is one of the most trusted life insurance covers in the Indian market.

Due to the increasing awareness about life insurance, term plans appeal to most of us because of the inherent benefits of life cover at the lowest possible premium, Income Tax benefits and ultimately for the peace of mind regarding the safety of our near and dear ones. Now you must acknowledge that getting a term insurance policy is certainly one of the most important jobs to do.

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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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