A term life insurance policy is a must-have in the investment portfolio as it provides financial protection to the family in the event of the policyholder’s untimely demise. Over the years, a term life insurance policy has gained immense popularity for two reasons. It helps you get higher insurance cover at an affordable premium, and two, it provides tax benefits under Section 80C of the Indian Income Tax Act.
Let us look at some of the lesser-known uses of a term life insurance policy other than getting life cover.
Apart from getting a lump sum payout, there are term plans that provide a monthly income option. In the event of the policyholder’s demise, the sum insured can be paid as a lump sum or in instalment as monthly income to the nominee. You can have the flexibility to choose how you want the insurer to pay when buying the policy.
Additionally, many insurers in India offer a monthly income option as an add-on. These incomes are usually expressed as a percentage of the sum assured, and it can help your family get a steady stream of income for a fixed number of years in your absence. Moreover, monthly income add-ons have an increasing income option, where the monthly income increases by a fixed percentage after every year for which the income is assured.
All term plans allow you to appoint a nominee. It is a mandatory and important step in the buying process. In the event of your untimely demise, the nominee or the beneficiary you appoint will receive the payout. Today, many insurers allow the term life insurance policyholders to appoint multiple nominees and give them the flexibility to allocate a percentage of the sum assured.
You can also change the nominee, or the percentage of the sum assured allocation at any time during the policy term. As a policyholder, this is an excellent feature. You can distribute the sum assured equally to each of your dependent family members.
Today, the insurers in India allow the policy buyers to purchase a term plan individually or jointly as a couple. In a joint term plan, the insured can include their spouse as part of the plan, and both will get life coverage under a single policy subject to terms and conditions.
Accidental death or disability rider
You can purchase an accidental death or disability rider to widen the coverage of your term plan. If you have purchased this rider, the insurance company will provide an additional payout over and above the sum assured of the basic term policy if you get into an accident leading to death or permanently disabled. This is an excellent rider for those who are involved in high-risk jobs like operating heavy machinery.
Critical illness rider
As the name suggests, the critical illness riders allow you to get a lump sum payment if you are diagnosed with life-threatening illnesses like cancer or other diseases, as listed in the policy documents. Every insurance company has its definition of critical condition, and therefore you must carefully check the inclusions and exclusions of the policy.
This is another useful feature for your family. In the event of your demise before the policy term, the insurer will waive off the future premium. This means your family need not face the hardships of paying the premium to keep the policy active till the end of the term and get the death benefit.
Jeff Morgan is currently associated with NetworksGrid as a technical content writer. Through his long years of experience in the IT industry, he has mastered the art of writing quality, engaging and unique content related to IT solutions used by businesses.