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Term Insurance, medical insurance & benefits of Insurance
Term insurance is a type of life insurance policy which offers cover for particular time period or years. A death benefit is paid out to the policy holder if the insurer dies during the term of the policy. There is no payout from this policy if the insurer is surviving through the term period.
The main reason why people take life insurance is to financially secure ones family in case of any unforeseen situations.
Life insurance can be taken in two ways:
- Term Insurance- which is a full life cover
- Endowment Insurance which provides life cover along with savings.
Advantage of Term Insurance:
- Lesser Premium
Term plan is a complete life cover plan. There is no profit or savings component with this kind of plan as it is a much more affordable life cover as compared to other life insurance plans. An individual has the liberty to opt for a larger sum as life cover by paying lesser premium when compared with similar endowment life insurance plans.
- Option to customize payouts
Policy holder can customize pay out according to his/her requirements for example the payout can be in lump sum or regular monthly installments. One can also take part payout as lump sum and remaining as monthly installment.
- Time Duration
Term plans give option to the policy holder to choose the time duration for the policy which may extend from 5 years to 50 years as per requirement and premium paying capacity.
- Mode of premium payment
Premium for term plan can be given in lump sum or monthly depending upon the fund availability with the policy holder. One can also go for semiannual or quarterly premium payments as per convenience. Insurance companies offer discounts on annual premium payments.
Income tax exemption
The premium paid towards term plan gets exempted from income tax under section 80C of the Income Tax Act. The proceeds at the time of policy maturity are also empted from Income tax under section 10(10D)
- Supplementary income
Term plan acts as supplementary income to the family of the policy holder in case of his/her death. Some plans also compensate for loss of income due to disability or terminal illness.
Key Features of a Term Plan:
- Better life cover
An individual can opt for a higher life cover by paying the same amount of premium as term life insurance plans are more affordable. For example a Term Plan with a cover of Rs. 1 crore is much affordable for a 30 years old person than an endowment plan for Rs. 1 crore. Therefore Term Plan comes out to be more feasible than other plans.
To enhance the utility of the term plan , a policy holder can take riders on existing plan. For example a policy holder takes a rider for critical illness over his/her term plan then the insurance company shall pay the sum assured in case of any criticalillness which may arise to the insurer. This will be addition to the amount which shall be paid by the insurance company over the death of the policy holder. There are many riders which can be opted such as disability cover, loss of employment cover, waiver of premium cover etc. Based on specific needs a policy holder can choose riders to make his/her term plan more useful.
- Extra cover
Few companies give an option to the policy holder to enhance or increase their life insurance amount at critical stages of life. For example a policyholder may want to enhance life cover at the time of marriage or child birth. This helps the policy holder to plan for his family and increase protection as and when his capacity to pay premium increases.
- New features
Insurance companies keep coming up with new features and innovations in life insurance plans. For example companies have been pro actively offering discounts on term plans to non smokers. A person can easily buy a term plan over the internet after comparing various plans online. Term plans are comparatively cheaper for healthy individuals.
- Age of Entry
Term Insurance can be taken after completing 18 years of age and maximum age for term plan is 65 years. The premium increases with the age hence it is advisable to take a term plan as early as possible.
- Agee of Maturity
Term plan which offers cover for lifetime is the best plan which one should opt for. Most of the insurance companies give plans providing cover till 65-70 years of age of the policy holder.
- Benefits on Survival
With coming of Term Return of Premium ( TROP) plans the policy holder can get returns at the end of the policy tenure . If the policy holders dies during the tenure of the policy then sum assured will be paid to the beneficiary as decided. TROP plans have a higher premium as compared to basic term plans.
- Benefits on Death
Nominee or assignee shall get the sum assured on account of death of the policy holder. The amount of death benefit does not change throughout the policy tenure. Death benefit amount should be chosen by the policy holder keeping in mind future financial requirements.
To safeguard financial stability at the time of various health issues , health insurance acts as a strong support. It is like a legal surety from the insurance provider to provide financial assistance at time of any health issues to be treated.
Key Features of Health Insurance Plan:
- Cashless treatment
Most of the insurance companies provide cashless treatment provided treatment takes place in a hospital coming within their network. In any case if treatment is taking place in a non network hospital then the insurance company will reimburse the bills after clearing of the bills at the hospital.
- Renewal of policy online
Health insurance can be renewed online after the policy year has been completed. The process is simple and quick not taking much time of the policy holder.
- Day care Treatment
Few health policies cover day care treatments in which if the insured person has undergone treatment for 24 hours in a hospital then the insurance company shall bear the treatment expenses.
- Pre and Post Hospitalization
Usually 30 days prior and 60 days post hospitalization medical expenses are covered by most of the health plans.
- Upgrade of Policy
Policy holder can upgrade existing health policy to increase cover or to add new family members like spouse or new born.
Types of Health Insurance Plans:
- Personal Health Insurance
Health Insurance is covering the individual, who has taken the plan.
- Family Health Cover
Family of the insurance holder will be covered in such a plan which usually comprises of 2 adults and 2 kids. Some plans may offer to add parents and parents in laws in the health plan.
- Health plan for Senior Citizens
Many insurance companies have come up with health plans for people above the age of 60 so that such people can also get financial assistance at time of health issues.
- Critical Illness Plan
Critical illness as specified by the insurer shall be covered in such a plan.
- Maternity Plan
Aims at providing complete medical assistance to pregnant females. Sometimes new born is also covered in such a plan.
Frequently Asked Questions (FAQ)
Can a person buy 2 Term Plans together?
Yes, an individual can buy more than one term plan and can nominate the same beneficiary for all the term plans.
How to calculate the amount for which Term plan should be taken?
The thumb rule is that term insurance cover should at least 8-10 times of an individual’s annual income. For example if a person is earning Rs. 5,00,000 annually then he should go for a term plan giving cover of Rs.5,000,000.
How much of an individual’s income should be spent on life insurance?
6% of annual primary income should be spent on life insurance and additional 1% for every dependant being added.
How to pick the best Term plan?
- Understand why it is necessary to invest in Term Plan.
- Identify ideal term duration.
- Figure out how much coverage will be sufficient.
- Compare different plans available.
- Choose the best suited policy keeping in mind your capability of paying premium and payment schedule.
What is grace period for health plan?
Grace period is the additional time given to the policy holder by the insurance company to make payment for an expired health plan. This time is generally for 90 days.
What are the Do’s and Don’ts before buying a health plan?
- Be clear with all restrictions in the health plan you opt for.
- Go through the terms and conditions carefully-
- The clauses for already existing disease.
- Waiting period for a particular disease to get cured before taking cover for another disease.
- Capping on various hospitalization expenses.
- Look for any co-payment clauses, if any.
- Conditions laid for renewal of policy.
- Age limit till when renewal can be done.
- Reveal details of all pre-existing health issues including
- Major problems.
- Conditions like diabetes or high blood pressure.
- The company may want to get a medical test done depending on age and health conditions of the person.
- Get to know which tests shall be carried out by the insurance company before granting the insurance.
- Be clear who is going to bear the expense of such tests.
- Pay the premium only after acceptance of your proposal by the insurance company.
- Renew the policy carefully for the rest of your life.
- Cover health related facts or it could lead to dispute at the time of making a claim.
- Allow a gap of even one day in your policy renewal or your cover may be inadequate or useless.