There are two ways the individual can take life insurance:
1. By opting for a pure life cover, also known as term insurance
2. By taking life cover with a savings component built-in,also called endowment insurance
Why Term Insurance is better?
Term plans provide pure life cover. This means there is no savings / profits component. They are basic plans which make life insurance more affordable vis-à-vis other options. It is possible for the policyholder to opt for a larger life cover at a lower premium when compared to a similar endowment plan.
Some of the key features that make term plans indispensable include
1. Larger life cover
Since term life insurance plans are more affordable it is possible for an individual to opt for a higher life cover for the same premium as an endowment plan. For e.g. a 30-year old can get a term plan with a cover of Rs 1 crore for a 30-year term by paying a premium.
The Rs 1 crore endowment plan will most likely out of bounds for most 30-year olds. However, taking a term plan for a similar cover is relatively more feasible.
The policyholder can attach riders to the term plan, thereby enhancing the utility of the policy. So by opting for a critical illness rider or a critical illness plan, for instance, he is entitled to receive the sum assured on being diagnosed with the critical illness. This is in addition to the death benefit of an equal amount on death over the term of the policy. There are other riders to choose from like - loss of employment cover, disability cover, waiver of premium cover, among others. The policyholder should select riders based on his specific needs to make the life cover more suitable and meaningful.
3. Enhanced cover
Certain insurance companies offer the flexibility to enhance the life cover during critical stages of the policyholder's life. For instance, the policyholder may be permitted to enhance life cover by 50% at the time of marriage and by 25% at the time of turning a parent. This makes it possible for him to start with a modest cover and then enhance it as responsibilities increase as also the ability to pay higher premium.
4. Innovative features
While insurance companies have been quick to innovate in general, they have been most innovative with regards to what is term plans. For instance, companies have been quick and proactive in cutting premium rates even offering extra discounts to certain categories like non-smokers, for instance. Buying term plans is now quite convenient thanks to the internet. It is possible for a healthy individual, as defined by the insurer, to buy a term plan over the internet without taking a medical test.
5. Tax Benefits
Buying term insurance can also bring with it a host of tax benefits. As per section 10 (10D) of the Income Tax Act*, the sum assured that a policyholder receives after the maturity of the plan is tax-free; this also applies when the person insured surrenders their policy or loses their life. Furthermore, the bonuses that are received with this amount are also exempt from tax, under section 10 (10D).
6. Multiple Payout Options
When you sign up for a policy, you are required to pay a fixed amount to the chosen insurance provider to receive benefits. You can choose monthly, quarterly or annual payouts, as per your convenience. What this ensures is the death benefit to the beneficiary, in case of the demise of the policyholder. It could either be given out as a lump sum payout or in a staggered manner, which is equal to the sum assured.
7. Premium waiver
As the term suggests, premium waiver refers to a benefit wherein any future premiums are waived off, in case of special circumstances. For instance, this applies in cases where the insured policyholder is a victim of permanent disability due to an accident. This is applicable only if all the previous premiums have been paid.
Who should buy Term Insurance plans?
Term insurance plans are for everybody. They provide life cover at affordable premiums for everyone, be it a business person or a salaried employee. They are an excellent hedge against the uncertainties of life at any age. For those in their 20s, it is a prudent move to start with a plan that gives high cover for a low premium, while for those in their 30s with growing families and increasing liabilities, it is a good protection from financial uncertainties. For those in their late 40s and 50s too, term insurance can give adequate coverage for responsibilities like children's education and weddings, while allowing them to plan for their retirement.
Why buy HDFC LIFE Click 2 Protect Life?
If you look around, there are several insurance companies that offer a range of plans, but it is always a good idea to go for a brand that is trustworthy and offers credibility. That’s exactly where HDFC Life Click 2 Protect life steps in. Whether policyholders choose to receive coverage for their entire lifetime, or are looking to lean on a safety net in their retirement years, post 60 years—it’s absolutely their call!
There are 3 plan options available:
Life Protect:This option provides protection to your family by offering a lump sum amount to the members, in case of your death.
Life & CI Rebalance:This plan attempts to strike a balance between
Death and Critical Illness benefit. The critical illness cover increases every year, while the life cover reduces. As part of this plan, future premiums are done away with, in case you are diagnosed with any specified critical illnesses
Income Plus:Under this policy, the life assured doesn't have to worry, because they covered for the entire policy term. They can also get a lump sum payout on maturity, with regular income, post the age of 60.
And if you thought that was all, wait to hear more. HDFC Life Click 2 Protect Life has a 98.01% claim settlement ratio**, and an additional sum is paid out, case of accidental death. There are other benefits, including waiver in premium, in case of critical illness.
Opting for add-on riders is also a good option to provide an added layer of protection. These additional income benefits are applicable in case of total permanent disability after an accident or even in case of critical illness.