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Read on for more information on how term insurance can benefit different age groups and other crucial aspects of these plans. 

Why insurance is essential for your portfolio

Insurance is a basic necessity for every investment portfolio, considering the uncertainty of life itself. The policyholder will naturally want to provide their family with the same lifestyle and financial security upon their absence because of an unfortunate/sudden demise. This is where term insurance or other forms of life insurance come into the picture. 

What is term insurance? 

Term Insurance is a sub-type of life insurance that offers financial safety to the policyholder’s family in the tragic event of their unfortunate demise during the policy tenure. These plans pay out a death benefit to the nominees of the insured individual in this case. They offer financial safety for the family for a specific duration or term. Premiums are usually more affordable for these plans than many other types of life insurance plans. You can utilize a term insurance calculator to calculate the payable premium amount. 

Which is the right age to invest in a term insurance plan?                                           

As mentioned initially, there is no hard and fast rule in place that dictates the right age to invest in a term insurance plan. You can purchase them once you are 18 and upwards, usually until age 65. However, here are some core points that you should keep in mind for every age/life stage: 

• Those in their 20s- This is the ideal time to purchase term insurance since it is highly affordable and ensures financial coverage for the family in case of any unfortunate mishap. The risks of death/disease are automatically lower when one is young, which explains the possibility of obtaining higher coverage at a lower premium. 
• Those in their 30s- These are times when people have more financial responsibilities and loans to pay off. However, suppose you have not got a term insurance plan yet. In that case, you should take it immediately to ensure the same financial coverage and future lifestyle for your family in your absence. 
• Those in their 40s- This is when people have the maximum responsibilities. Term insurance plans should be a must if not purchased until now because they will offer financial coverage for children in the absence of their parents while helping them meet future educational and other costs. 
• Those in their 50s – People should not put off buying term insurance, if they have still not got one yet. This is vital for safeguarding their children’s financial and educational future and covering any liabilities that may remain, like loans or mortgages. However, the premiums will be pretty high. You can also add riders if you can afford it. 

People should not wait until they are in their 60s to purchase term insurance. Hence, it can be said that the 20s and 30s are the best time to buy term insurance. Premiums are lower, and it will safeguard the family financially. The best part is that you can also get tax benefits on your investment. 

Why should you invest in term insurance? 

You should consider investments in term insurance for several reasons. Some of them include the following: 

• Life cover for the policyholder, insuring the family financially after their demise
• Add-ons like accidental death, accidental disability benefits, critical illness coverage, and others. Accidental death coverage is a payout of a benefit upon the insured person’s death in case of an accident. Critical illness coverage offers financial protection against critical and potentially fatal ailments. In contrast, accidental disability benefits offer a payment of a promised sum to cover loss of income and financial needs in case of any permanent/temporary disability arising from an accident.
• For your term insurance investments, you can get tax benefits under Section 80C of the Income Tax Act, 1961. This section enables benefits up to Rs. 1,50,000, and hence you can claim your premium payment as a deduction while filing your taxes. Moreover, the death benefits, or the benefits listed under any riders purchased with the plan, are tax-free under section 10D of the Income-tax Act, 1961.
• Some policies may provide a waiver of premium in case of financial emergencies or other issues, provided you take it as a rider. This means that the policy may continue even in case of missing premium payments due to loss of income or other reasons keeping the coverage intact.
• Some term plans may even have maturity benefits (return of premiums) for policyholders

Conclusion

You must purchase term insurance coverage to live a stress-free and financially secure life. However, you should examine a few things before finalizing a term plan. The insurance coverage should be based on the insured’s annual income and financial objectives. Many people choose inadequate coverage, which can later result in financial stress for the family. Additionally, some people opt for a brief coverage term to pay less in premiums. However, if the policy term is short, you must purchase new policies after the policy period concludes. You might not receive the same premiums from a new term insurance plan and spend more.

Additionally, if you neglect to reveal information regarding current medical conditions or smoking habits while purchasing the plan, your family could lose out on the sum assured. As a result, the purpose of buying a term plan would be defeated. Simply put, do your homework, comprehend the terms and circumstances, and purchase term insurance when you are young.

All term insurance plans (and, for that matter, all life insurance policies) require the policyholder to name a nominee who can receive the death benefit in the event of the policyholder’s unfortunate demise. However, in some cases, the policyholders and nominees are unaware that insurance companies operate under specific terms and conditions when approving a term insurance claim. If a claim falls under one of the exclusions, the insurance company might reject it. These exclusions might also vary from one provider to the other. However, there are some exclusions to which most insurers adhere.

What Are Exclusions In A Term Plan?

Most term life insurance policies allow for various levels of customization based on the level of protection and coverage desired. As a result, the insured may receive specific terms and conditions based on their particular term insurance policy.

These term insurance terms and conditions, also known as exclusions, outline the situations in which your beneficiary’s claims may get rejected by the insurance company. While most will be tailored to the insurer and the policyholder, a few exclusions are common to most term life insurance policies.

A list of the most common exclusions

These exclusions may vary from one insurance provider to another and one policy to another. Having said that, the following are some of the most common exclusions in term insurance plans:

1. Suicide and/or death as a result of dangerous activity

Death by suicide within the first year after purchasing the policy is a common exclusion in term life insurance contracts. Furthermore, circumstances involving harmful activities resulting in death are generally excluded. This could include dangerous sports with a high risk of mortality.

2. Involvement in criminal activities

This exclusion effectively indicates that if a policyholder dies due to their involvement in criminal acts, their beneficiaries will be unable to obtain term insurance benefits, i.e. the sum assured. This is a relatively common exclusion and there are no add-ons that can protect policyholders against it.

3. Previous Medical Conditions

Before receiving your insurance, you must disclose any health complications you have or are anticipated to have, resulting from pre-existing or inherited conditions. Your term insurance policy will always be issued with these risks in mind, affecting the cost of your term insurance premium, which you can determine using an online term plan calculator. However, if you have not disclosed a pre-existing medical condition to the insurer before purchasing the insurance, you will not be covered for it. This means that in the event of your death due to a pre-existing medical condition that the insurer was unaware of, your beneficiaries will be unable to obtain the death benefit.

4. Death as a result of intoxication or drug use

In India, most life insurance firms refuse to provide term insurance coverage to heavy drinkers and drug addicts.. Even if you conceal your drinking problem and drug addiction, purchase a term insurance policy, and die from an accident or other incident while under the influence of drugs or alcohol, the insurance company may deny the life insurance claim under the terms and conditions specified in the policy.

What Are Riders, And How Can They Help?

A term insurance rider is an addition to a policyholder’s base term insurance policy that allows them to extend their coverage benefits. A policyholder can opt for a term insurance rider by paying a nominal additional premium.

Which Riders Can You Opt For?

While Riders will not cover the exclusions completely, they can enhance the scope of the term insurance plan and cover various additional contingencies. Some of the most frequently offered term insurance riders are:

1. Accidental Death Benefit Rider: If the policyholder dies in an accident, an additional sum assured specified under the rider is paid out in addition to the base policy sum assured. For example, a policyholder purchases a term insurance policy for Rs. 80 lakhs and adds an Accidental Death Benefit rider worth 20% of the sum assured. Then, if the policyholder dies in an accident, the dependents receive Rs 80 lakh plus an additional 20% of Rs 80 lakhs, or Rs 16 lakhs. As a result, they receive a total of Rs 96 lakhs.
2. Critical Illness Rider: With this policy rider, the life assured receives a lump sum payment if they fall sick with a critical illness covered by the rider. The goal of this rider is to offer the life assured with a lump sum amount that can assist them in receiving medical care for the illness. It can also ensure that the burden of any unanticipated medical costs does not derail the policyholder’s life goals.
3. Waiver of Premium Benefit Rider: If a policyholder cannot pay the premium owing to an accident-related contingency such as death, severe illness, or permanent total disability, a Waiver of Premium Benefit rider assures that all future premiums of the term insurance policy are waived off. This means that the term insurance policy will stay in effect until expiry, and the life assured, or their family members will not be required to pay any further premiums for the remaining tenure. It is handled by the life insurance provider, providing additional security to your life goals.
4. Accidental Permanent Total/Partial Disability Rider: An amount is paid to the life assured under this rider in case of a total or partial disability caused by accident. Because the life assured is unlikely to be able to meet medical expenses and further reduce their earning capacity, the insurance company compensates them with a pre-agreed proportion of the total sum assured.
5. Family Income Benefit Rider: Under this rider, in the event of a contingent event, as stated in the terms and conditions of the policy, the policyholder’s family receives a percentage of the rider sum assured each month for the remainder of the rider period, subject to a minimum of ten years. This allows your family to receive a regular monthly income in the absence of your income, assisting them in meeting day-to-day expenditures and staying on track with their life goals.

Importance Of Reading The Policy Document

Not all term insurance plans contain the same fine print, as multiple factors influence the particulars of the policy. So it is prudent to go through the policy document thoroughly during the free look period. It is a 15-day (30 days in case of online term plans) period during which it is possible to return the policy and get a refund after deducting any costs incurred by the insurance provider.

If proper attention is paid initially, the chances of a rejected claim will decrease, and adding riders will make the policy more comprehensive.

What is term life insurance?

Term life insurance is a type of insurance that provides a death benefit in the event of the insured’s death. However, this type of coverage has a limited lifespan. The death benefit provided by a term life insurance policy expires at the end of the policy term. There are no maturity benefits involved in the case of a term insurance plan.

What do you need to consider when buying term life insurance?

– Cost – The premiums are crucial as they need to be paid for a long period of time. So you must be careful about getting a term plan as early as possible to get the best premiums. You can calculate the premiums using a term plan calculator online.

– Coverage amount – The sum assured should be high enough to provide ample support to your family for an extended period of time. The ideal cover amount for a term insurance plan is usually 15-20 times your current annual income so that your family has smooth sailing in a time when there is no income.

– Term length – Another important aspect of a term plan is the policy period. It should ideally last you till the time you are working. So to calculate the term, subtract your current age from the age till which you plan on working, and you will get the ideal policy term for you.

Are the premiums locked for the entire policy term?

Owing to the upholding of certain clauses by the policyholder, the premiums are locked for the entire policy term. That is why getting a term insurance plan early in life is recommended to lock low premiums for the entire term.

What is the effect of smoking on the premiums?

Yes, smoking and your health play a part in calculating premiums for your term plan. Make sure that you disclose the accurate details of your lifestyle so that there is no snag in the claims process later on.

What if the policyholder meets an accidental death?

Most term plans pay out death benefits in case of accidental death, and some require an accidental death rider to be added to enhance the scope of the policy. Similarly, you can also add riders for critical illness and disabilities.

What if the policyholder meets an untimely demise in a foreign country?

As long as the policyholder is moving or temporarily residing in a country that is deemed safe by the insurance provider, the insurance will be active. Just make sure to inform the insurance company about the move and update your contact details.

Are there any maturity benefits?

No, in a pure term plan, there are no maturity benefits. You can opt for a return of premiums plan, which will not include any profits. For an element of investments, or savings, opt for a ULIP or Endowment plan.

What kind of death is not covered by a term insurance plan?

Usually, death due to terrorist acts or death by natural calamities are excluded by insurance companies, so you need to ensure what is covered and what isn’t in the term insurance plan you are purchasing.

Can you buy a term insurance plan if you are an NRI?

Usually, the companies require address proof from the policyholder. If the person is a resident of India, they can submit their documents and purchase the policy online and give some documents like ITR and medical reports on their next visit to India.

What is the claim settlement process?

The claim settlement process is straightforward, given that you have given all the right details when purchasing the policy. To begin, just inform the insurance company of the policyholder’s demise, and then they will take you through the rest of the process.

Wrapping Up

A term insurance plan is a type of insurance that provides death coverage for a set term. It can be a great contingency plan for your family in case of your untimely demise. Although fairly simple to understand, there are a few considerations that you must have before going in for a plan. Some will make you choose the right plan for you, and some will enhance your knowledge and help you navigate the process. It is essential that you be thorough in your research so that later there is no snag later. Start your research about the perfect term plan today!

The financial markets were blown away in March 2020 when the news of the pandemic broke but subsequently the stock market made a quick recovery as well. It is still early days for gauging the economic impact of the current wave of pandemic but it’s also the time to take stock of one’s own finances. When it comes to managing money one needs to be prepared enough to meet any financial emergency at any point of time. An untimely death of the breadwinner in a family can be the biggest setback and leave the family stranded for funds to meet their goals.

And, it all starts with a plan in place to achieve your dreams and financial goals as and when they arise at different stages of life. Be it the child’s education, home buying or your own retirement – have a plan to fund your goals without having to borrow from friends, relatives or financial institutions. A plan, therefore, needs to be such that it not only takes care of the savings but also provides life protection till the time the family needs it.

HDFC Life Click 2 Wealth, a unit linked life insurance plan, is designed to meet the evolving needs of the individuals in current times. The plan offers market linked returns on the premium paid and provides life protection as well. A unit linked insurance plan essentially directs your investments into assets such as equities and debt and helps to grow your money over the long term. 

It is a comprehensive plan that comes with flexibility to choose life cover options, fund options and the privilege to enjoy features that can enhance fund value during the policy term. You not only see your savings grow over time but you are also assured of a life cover during the policy term. HDFC Life Click 2 Wealth turns out to be a smart investment choice amidst uncertainties around rising Covid cases.

Plan Options
What makes HDFC Life Click 2 Wealth a unique offering is the way it is structured to meet protection and savings needs as one ages. Armed with options, you can customize the plan as per your requirement. There are three options to choose from – Invest Plus Option, Premium Waiver Option and Golden Years Benefit Option.

The Invest Plus Option is the plain-vanilla protection cover providing life coverage and helps to build a fund value on reaching the end of the policy tenure. The Premium Waiver Option is the one that ensures your loved ones have their milestones protected by taking care of the financial responsibilities in your absence. And lastly, if you wish to save towards your retirement, the Golden Years Benefit Option that comes with whole life cover is the one to opt for.

Features to use
In all the three options in the plan, you have the flexibility to choose any of the 11 fund options that come with unlimited free switching to help do asset allocation as per your risk profile. You also get the advantage of Systematic Transfer plan strategy to manage volatility while investing your money in the market. What’s more, the plan makes sure you end up earning more as there is the feature of Return of Mortality Charges (ROMC) and Special Additions that ultimately shores up the fund value for you.

The plan to rely upon
What is important is to take steps to protect one’s savings and have a plan in place to meet long-term goals. HDFC Life Click 2 Wealth is one such plan that provides life protection to meet uncertainties arising out of an early death and also to help grow savings for important milestones in life. While social distancing and double vaccination remains the only best foot forward till a pandemic-free world emerges, preparing to meet the life uncertainties head-on with HDFC Life Click 2 Wealth is what you can rely on.