Multiple options to choose from, find the term plan that fits you well
MUMBAI: If you are in the market for life insurance, a term insurance policy is the cheapest product to buy. And to add convenience to your buying experience, most insurers now also offer it online.
The straightforward structure of a term plan is when the nominee gets a sum assured on death of the policyholder during the policy term and nothing if policyholder survives the term. However, there is a lot of customisation in the way insurance money can be given to the nominee nowadays. The nominee can get: periodic income for a fixed number of years, a combination of lump sum and income, or a periodic income that increases regularly. Then there are plans that offer payouts if the policyholder contracts a terminal illness, while some customise the policy with an inbuilt personal accident cover too.
LUMP SUM OR INCOME?
The choice between a lump sum and a staggered benefit option should depend on your circumstances and nominees, said Abhishek Bondia, MD, SecureNow.in. “You need to account for your debts, financial goals and family members. So, if your spouse is financially clued in, a lump sum benefit works well, else the staggered benefit option is better. Even then, some lump sum is needed as a buffer until the family stabilises. Someone with debt can look at a higher component of lump sum benefit.”
The good thing is, some plans allow you to customise the death benefit to offer part lump sum and part periodic payments. “You should also consider plans that increase your sum assured automatically at milestone events. This takes care of increased insurance needs,” said Yashish Dahiya, co-founder, Policybazaar.com.
There are income replacement plans as well. These plans offer periodic income until a goal is reached. So, if it is linked to retirement then upon death of the policyholder, the beneficiary gets periodic income till the retirement age of the policyholder. If the policyholder dies closer to retirement, the sum total of payouts reduces.
TERMINAL ILLNESS COVER
Term plans have also started paying the sum assured, or a portion of it, if the policyholder contracts a terminal illness. But, according to Bondia, this is not a feature that should swing your decision. “Insurers will insist on a doctor’s certificate that the policyholder is terminally ill. The insurer will then carry out its own investigation. The process may not be smooth.” Even the policies that build in personal accident covers should be considered carefully, said Bondia. “A standalone personal accident policy is not only comprehensive, as it takes care of temporary total disability, but is also cheaper.”
So, to make the right decisions, approach the product from the point of view of your beneficiary.