In India, term insurance continues to be an often overlooked investment. However, it is actually an incredibly important investment that anyone and everyone with assets and beneficiaries must always investigate. Though it may be an unpleasant experience to think about your death, but planning ahead today about this universal fact can certainly give you peace of mind. Also, will there be anything else that would make you happier than knowing that your family will be financially safe and secure even if the worst were to happen tomorrow?
Buying a term insurance plan isn’t something we do every day – we just need to do it only once in a lifetime. So, it becomes crucial to get familiar with all the ins and outs of this important aspect of life – securing your finances. The biggest issue with term insurance is that not all policies are the same and, if you are unfamiliar with what lies within, choosing the right option can be a daunting task. To avoid this, it is really important to educate yourself on term insurance products and how they help in building a shield against Death, Disease and Disability.
The fundamental benefit of term insurance is the monetary benefit the nominee receives on the death of the insured. Only condition being, death happens within the policy tenure. Most people believe term insurance is expenditure rather than an investment. What they fail to comprehend is the inherent benefit such plans have in securing your family and providing peace of mind, which is essential.
You can enjoy tax benefit on the premiums paid and tax-free payment to the nominee in case of death. In case you are the only earning member in your family, term insurance becomes a must for you! Term insurance is the most reliable way to make sure your family is financially protected and secured when you’re not around to take care of them. There are term plans, which give a guaranteed pay-out at the end of term tenure, irrespective of the life status of the insured. Such plans are referred to as Whole Life Term Life Plans, though they are expensive compared to a pure term plan. For example, while a 30-year old can get pure term plans for Rs 1 crore for a monthly premium ranging from Rs 650 to Rs 850. If you are looking for a WTP, the premium is likely to be in the range of Rs 1,200 to Rs 6,500.
Yet another enhanced protection that the insured gets when purchasing term insurance is Critical Illness (CI) Benefit. There are numerous term plan options available in the market that offer policyholders cash pay-outs on being diagnosed with major illnesses like cancer, stroke, heart attack or multiple organ failure. It is likely that the cost of treatment can leave your rainy day savings dry. Thus, purchasing a term plan offering critical illness benefits is strongly suggested. Such plans are fixed benefit plans offering lump sum payout. You can buy critical illness plan in two different ways, one as a rider with the term plan and secondly as a standalone plan offered by most insurers offering health and life insurance.
For example, a Critical Illness cover from Future Generali, which can also be bought as a stand-alone product, covers 59 illnesses. Max Life, on the other hand, has a CI plan offering one-time payout which covers 40 illnesses.
Most of you perceive term insurance as an excellent way to create a shield against the possibility of losing a source of income due to death, but very few consider protecting their income in the event of disability attributed to critical injury, which is more likely than death itself. According to international reports, a 20-year-old has over 26 per cent possibility of being temporarily disabled for at least 12 months before attaining the retirement age.
To mitigate the possibility of being left without an income, you can avail special riders as part of your term insurance plan in the event of disability. The rider will give you a monthly income for a fixed tenure or lump sum pay-out on the occurrence of permanent disability. The amount that the benefactor gets completely depends upon the criticality of the disability. In the case of total disability, the insured gets the full sum assured, while in case of partial disability, the insured only gets partial sum assured. The conditions and payout plans may differ for each insurance company. The premium for Aegon Life’s iTerm plan with a total payout of Rs 55 lakh, which includes a one-time payout of Rs 25 lakh and rest staggered over 8 years will be in the range of Rs 8000 to Rs 9000 annually for a 30-year-old. Similarly, PNB Met Life’s Mera Term Plan offers a total pay-out in the region of Rs 61 lakh, for an annual premium of Rs 12,000 approximately.
(By Santosh Agarwal, Associate Director and Cluster Head-Life Insurance, Policybazaar.com)