The purpose of a term insurance policy is simple, ‘to offer sufficient financial support to your loved ones when you are no longer there to ensure the same.’ But imagine if your nominees have to run from post to pillar to avail the benefit. Or that they will be looking at a large sum lying in the bank deposit, earning meagre interest.
No doubt, a term life insurance will provide the money, but does it offer the support it is supposed to? Perhaps it can if you look closely. Here are some features offered by term plans which will not only make your nominees life easier in your absence, they will also offer the support along with money.
Call it the real financial support instead of just the money. Let’s see how.
The Features to Support Your Loved Ones
The 3 most important features that will assist your dependents in various crisis moments including your untimely demise are:
- Waiver of Premium Benefit
- Regular Income Pay-out option
- Life Stage Adjustment Feature
- Waiver of Premium Benefit
Risk of losing one’s life is not the only concern for their dependents. Disability, long hospitalization, etc. also cause one’s income to stall. Waiver of premium benefit ensures that in such moments of financial duress, the family does not bear the burden of continuing the life cover. Or in other words, the term insurance policy does not lapse.
If the insured opts for the waiver of premium benefit, the term insurance cover will continue without the need of paying additional premiums if the policyholder is disabled due to an accident. For example:
Viru has bought a term insurance policy with the sum insured of Rs. 1 Cr. And pays an annual premium of Rs. 12,000. He is supposed to pay the premium for next 25 years (whole policy tenure). He meets with an accident five years later and is declared permanently disabled because of it.
This even has forced the family to readjust to the new reality. However, in the meanwhile, his life cover continues, and further premiums are waived for him. This means his family is still covered if he is no longer there.
2. Regular Income Pay-Out Option
This option is quite useful when your nominees may not be able to manage a large investment themselves.
Imagine your nominees receiving Rs. 1 cr. one day which they need to invest to ensure a regular income for their future. Sounds chaotic?
What if your term insurance policy pays them a lump-sum amount and creates an income stream for next 10 years or so?
The second scenario is obviously easier to manage and makes the choices simple for your family members. Regular income pay-out option works as given below (considering the same example as above, Viru opted for regular income option):
- The insurer pays the nominees Rs. 50,00,000 immediately as lump-sum death claim
- Remaining Rs. 50 Lakh is converted to a regular monthly income of Rs. 41,667* p.m. for next 10 years
- If Viru had opted for a growing income option, the payout would be adjusted by a certain percentage each year to account for inflation.
* Tentative estimate, check with your insurer for more accurate estimates.
Life Stage Adjustments
Your life insurance need is not a static need. As your life evolves, your term insurance cover need can change. For example, a bachelor individual may need only Rs. 20 – 50 lakh as life cover, but a married individual may need more than Rs. 50 lakh and a married individual with kids will need even higher amount.
Some insurers provide the option of increasing your sum assured under the existing policy without any medical check-up under following life-stages:
- First child birth
- Second child birth
Apart from these, you should also revisit your life cover under the following circumstances:
- Major lifestyle change: (one spouse starting own business, leaving job etc.)
- Major income shift
- An increment in the liability (home loan, etc.)
Other Benefits to Consider While Buying Term Insurance Policy
You can also consider the following additional covers along with your basic term cover to create a better protection plan for your family.
- Critical Illness Cover
- Heart & Cancer Covers
- Accidental Death Benefit
Whichever benefits you choose or leave, the ultimate purpose of your term insurance policy should always be, ‘to make your dependents lives easy.