Insurance: Term policy as foundation for a sound financial plan

January 1, 2021 4:15 AM

A term insurance plan can provide long-term assurance to beneficiaries, and critical care benefits to the policyholder

A policyholder can get buy these riders while purchasing the term plan. Upon being diagnosed, the claim is paid out to the policyholder.

By Amit Palta

A term plan works as an income replacement tool besides enabling the family to continue with their existing financial savings plans. The coverage should depend on the individual’s family’s lifestyle, long-term financial responsibilities such as a child’s education, healthcare commitments to retired parents, as well as any financial liabilities such as home or vehicular loans. Life insurers have been innovating term plan offerings to meet increasing and varied customer needs.

Critical illness benefit
Lifestyle related ailments such as hypertension, diabetes, cancer and heart conditions are on the rise. According to the National Health Authority of India, 64.2% of total health expenditure by households are out-of-pocket expenditures. Keeping these issues in perspective, insurers have introduced term plans with the critical illness feature built-in. A policyholder can get buy these riders while purchasing the term plan. Upon being diagnosed, the claim is paid out to the policyholder.

Whole life option
The whole life option provides the extra cushion to people who are otherwise worried that they might outlive their policy term. With this option, people can insure themselves until they turn 99. Purchasing a term insurance plan is not enough and policyholders should make it a point to inform their dependents about the policy and how best to use the proceeds of the life cover.

Term insurance should act as the necessary foundation to build a sound financial plan. If planned well, it can provide long-term assurance to beneficiaries, and offer critical care benefits to the policyholder. Starting early and making an informed decision can provide essential healthcare and financial benefits for the policyholders’ future, making them resilient to uncertainty.

The writer is chief distribution officer, ICICI Prudential Life Insurance Company

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