Introduction

What is the most important thing for you in life? Ofcourse, your family, the people you love the most.

What can you possibly do to protect your family in case of an unfortunate event of your death which puts your family in financial troubles? You would go to any extent to protect your loved ones from any such trouble.

Buying an adequate term insurance cover can do this for you.

A term insurance plan will provide your family the financial protection to sail through financial difficulties in case of the unfortunate event of your passing on.

We will tell you how.

But before that let’s understand this.

Your ideal cover amount

Think of it in this way.

What do you want your term insurance policy to do in your absence?

Do you want it to replace your income so that your family continues to have the same amount of money every month as they used to have when you were around?

Or do you want it to replace your family’s expenses so that your dependents can continue to have the same lifestyle which they were used to even in your absence?

Or do you want it to cover your liabilities such as your home loan in case you pass on?

After all, you are trying to provide financial security for your loved ones in your absence.

As a rule of thumb, you can opt for a cover amount which is 20 times of your annual income. In case you have any liabilities, such as a home loan, you can add the outstanding amount to this.

So if you are 30 years old and your annual income is Rs. 10 lacs, you can opt for a cover of Rs. 2 crores which would be 20 times of your annual income. If you are 50 years old with the same income, you can opt for 10 times of your annual income i.e. a cover of Rs. 1 crore.

Financial security against uncertainties

If you are the only earning member of your family, your loved ones completely depend on your monthly earnings for living and maintaining their lifestyle.

If you are not around to bring that income home every month, your loved ones would not be able to maintain the lifestyle they were used to. In such a situation, they might have to face great financial difficulties.

This is when your term insurance plan will help your family and provide them financial security.

In case of an unfortunate event of your passing on, term insurance plan provides a huge sum of money to your family. This helps your family sail through the financial hardships when you are not around.

Financial security against liabilities

If you take a loan to buy a home or car, you usually have to pay it off over a number of years in the form of EMIs. In case you pass on during this period, your family will be left behind with the burden of paying the outstanding loan amount.

If you already have term insurance in place, the benefit amount your family gets from the term insurance can help them to pay off such loans.

We always recommend you to buy a term insurance plan and not to leave behind the burden of paying off your loans to your family.

Nuclear families get benefitted

Over the last 2 to 3 decades, there has been a social and cultural shift in India from joint to nuclear families. If you are living in a nuclear family, you family members lack the social security and support provided informally by joint families.

Most likely, you are the only financial support system for your family. If you already have a term insurance plan, your immediate family members get financial support in the form of term insurance benefit in case they lose you. This provides time to grieve and allows them not to worry about finances in the future.

Cover your Elderly Parents

Many young people who have not yet started a family of their own feel that they do not need insurance as they do not have any dependents. Think again!

If you have just started earning and have elderly parents back home, you should consider buying term insurance as early as possible. If your parents are retired and do not have any source of regular income, they are dependent on your income.

A term insurance can give them required financial support in their old age in case they lose you.

Low Premiums

Unlike any other life insurance plan, a term insurance plan is simple and affordable. You can buy a term insurance plan at the cost of a pizza every month.

If you are a 27 year old looking for a term insurance plan for yourself with a cover amount of INR 50 lakh, you can get it for as low as Rs. 4,000 which you need to pay annually to the insurance company. And the good part is that this low premium gets locked for your entire policy term and you pay the same premium every year for the rest of the policy years.

But as you grow older, the premium amount which you need to pay on any new term policy you buy increases. And the increase is steep once you cross the age of 35 or 40.

Buy a term plan for yourself early to lock in low premiums for life and save money.

Tax Benefit

Buy a term insurance policy and save income tax for yourself.

You get exemption under section 80(C) of the Income Tax Act for all the premiums you pay up to a maximum of Rs. 1,50,000.

Additionally, the benefit which your family gets from this term insurance policy in case you pass on is also completely tax free for them. They do not have to pay a single penny as tax on the death benefit cover amount they receive.

Increasing Life Cover

Your family’s financial needs evolve over time. As you progress in your career, get married or have a baby, your lifestyle changes and your financial commitment towards your family increases.

A term insurance which you bought for yourself when you just started earning might not be enough for you now.

So what is the solution? Go for another policy to get the additional cover. But this can get difficult as well as expensive as you age.

Here is one easy option you have. Buy a term insurance policy with increasing life cover to meet your increasing life cover needs.

Life insurers offer cover which increases by a certain percentage of initial cover amount every 5 years or on the occurrence of a life event such as marriage or arrival of a baby. Check out these options before you buy your first term insurance plan. These options are a little more expensive than regular life cover but might work for you in the long run.

And as you have an increasing life cover, you do not have to look for another term plan later in life. It definitely makes life easier.

Waiver of Premium (WOP)

There are a few add-on benefits which are available with your basic term insurance plan. You can consider buying them but they come with extra cost.

Imagine you have a term insurance policy and you have kept the policy running by paying regular premiums for the last few years. Now you fall sick and this sickness is so severe that you get confined to a wheelchair or bed for sometime. I know it’s a nasty thing to say but you know this can happen to anyone.

If this happens to you, you would have a lot of other things to worry about. You might lose your day job because you could no longer go to the office. You would have to pay for monthly rent, utilities, groceries and to top it all, you would also have to pay for your treatment. Paying Rs. 10 thousand to 15 thousand to keep your term policy running would be the last thing that would be on your mind.

In this situation, you can ask your insurance company to keep your term insurance policy running by paying premiums on your behalf. All you have to do to get this option is buy this add-on called Waiver of Premium (WOP) by paying a little extra premium at the time of buying the base policy.

Insurance companies usually provide this Waiver of Premium (WOP) option in case of disability or critical illness such as cancer. Please check what your insurance company offers before deciding on buying this add-on.

Accidental Death Benefit (ADB)

Life is full of uncertainties. Accidents happen which snatch peoples’ lives.
Accidental Death Benefit add-on provides extra benefit to your family in case you die by an accident.

Just to give you a perspective, imagine you bought a term insurance policy with a cover of Rs. 1 Crore. You also took an accidental death benefit add-on with a cover of Rs. 1 Crore.

In such a scenario, in case you die by an accident, your family will get Rs. 2 crores from the insurance company. This add-on gives an extra cushion just in case of accidental death and it comes very cheap. So why not have it, right?

But remember, in case you die by any reason other than accident, your family just gets the base cover amount of Rs. 1 Crore. So it is not a good idea to reduce your basic term insurance cover amount just because you opted for this add-on.

Critical Illness

Critical illnesses are difficult to deal with. God forbid, if you get any critical illness such as cancer or heart ailment, it will take you a long time to undergo the treatment and fully recover. More likely, you will have to take a break from your regular job to undergo the treatment for a year or two. This results in you losing your regular income for sometime.

Returning to a regular job after a long break can also be difficult.

Treatment of any critical illness also drains you and your family financially as it is very expensive. Imagine, how the condition would be if this were to happen 5 years from now. Steep rise in cost of medical treatment will make the situation worse.

We recommend you to buy a Critical Illness add-on which will help you deal with such situations. Critical illness add-on usually gives a large sum of money when your doctor says that you have got any critical illness which is covered under your policy. You can use this money to get yourself treated or to cover your other expenses.

This add-on is usually expensive and gets more expensive as you grow older. Rates also depend on the number of critical illnesses that are covered under the policy. Different life insurers have different lists of illnesses which are covered by them. We recommend you to read the details of what is covered by your life insurer before you decide to purchase this add-on.

Terminal Illness

Terminal illness is any illness in which your doctor declares that there is no treatment which can be done to save you and you are surely going to die in the next 6 months or 180 days. This is the last thing you would want.

But getting your life insurance cover can make life easier while you are still alive, even if you know that you are going to live only for sometime.

Most life insurance companies now provide terminal illness benefit which gives you life cover as survival benefit in case you are diagnosed with a terminal illness. In some plans it is inbuilt along with the basic cover while in some others offer it as an add-on with extra premium.

What is NOT covered under Term Insurance?

It is always good for you to know the conditions under which your insurance company might NOT settle your death claim. Yes, you read it right. There are a few caveats attached.

Suicides are horrible and can be the cause huge distress for loved ones who are left to deal with your sudden departure. Yet, term insurance plan usually does not provide you cover if you die by suicide during the first year of your policy.

If you die by self-inflicted injuries or hazardous activities, sexually transmitted diseases like HIV or AIDs, or drug overdose, your life insurer will usually not settle your claim. If your death happens due to driving under the influence of alcohol or narcotic substances, the insurer will reject the claim. It is always good if you abstain from such dangerous life-threatening activities. Even death by participating in an adventure or hazardous activity is not covered by many term insurance policies.

Non-disclosure of material facts by you at the time of buying your policy, which can alter your insurer’s decision to provide you term cover, can lead to rejection of claim. Always disclose all your family and medical history, financial or income details and lifestyle and habit details as accurately as possible. This goes a long way in ensuring that your family members are not denied the claim amount when they need it the most.

Some policies do not provide cover in case of death due to natural calamities like earthquake, tsunami etc. under term insurance.

We recommend you to read your policy document fully once you receive it to know what is not covered under your term insurance plan.

Claim Assistance

Claim processes can sometimes get complicated for the grieving family members. They might not know how to raise a claim under your policy or what documents they need to provide along with the claim form.

This might delay the settlement of even an otherwise genuine claim.

We are always ready to help you and your family. Your family can reach out to us and we will provide all the support and assistance required to raise the claim.

If you have bought your term insurance policy from us, we even help your family members by coordinating with your insurer for easy and prompt settlement of your claim.