If you have a thought on covering your family’s future, term insurance is most often the default choice. While it seems simple, in practice, there are so many questions when it comes to what term insurance pays out.
One of the most frequent questions regarding a term insurance policy of ₹1 crore covers accidental death and critical illness.
We will delve into that question in this article, debunking myths along the way and confirming the importance of knowing your insurance policy.
What Is Term Insurance?
Before we go into all the nitty-gritty, let us first start at the beginning. Term insurance is a life insurance that gives financial security to your loved ones in the case of premature death.
You pay a regular premium for a sum assured (₹1 crore in our example) which will be given by the insurer on your loved ones’ behalf in the case of any adverse incident within the policy tenure.
But is it so simple? Not exactly. The ambit of the term insurance cover can be altered based on add-ons or riders that you opt for. These riders can load heavily on the coverage of your policy, but for an extra premium.
The Fundamentals of a ₹1 Crore Term Insurance Policy
A ₹1 crore term insurance policy is designed to provide your family with a substantial financial cushion. In the case of your death, the insurance company pays the ₹1 crore sum assured to your nominees.
The amount enables your family to maintain their lifestyle, pay off debts, and realize long-term goals like education and marriage.
However, the standard term insurance plan only covers death due to natural causes or health-related issues. To cover other scenarios like critical illnesses or accidental death, you’ll need to look at additional options.
Does It Cover Critical Illness?
Critical illnesses like cancer, heart attacks, and kidney failure are not automatically covered under a standard term insurance plan.
But, you have critical illness riders provided by insurers that you can opt for as an additional premium on your policy.
A critical illness rider provides you with a lump sum amount at diagnosis of specified critical illness without taking into account the real cost of the treatment.
Why Is This Important?
A critical illness not only drains your pocket but also erases the financial security of your family. Healthcare in India is extremely expensive, and treatment for illnesses such as cancer or organ transplant will run into lakhs of rupees.
With a critical illness rider, you can be certain that you have a financial safety net to concentrate on recuperation without bothering about expenses.
What Should You Check?
When choosing a critical illness rider, these are a few things to check:
- List of Included Diseases: Various insurers insure different diseases. Find out if the diseases you’re most likely to develop are insured.
- Survival Period Clause: For some insurers, you have to survive for many days after being diagnosed before payment becomes eligible.
- Premium Cost: Adding a rider will add your premium cost. Make sure it’s affordable.
What About Accidental Death?
Accidental death is not usually included in the standard term insurance policies. An accidental death benefit rider is, however, provided by most insurance companies.
According to this rider, an extra amount assured (in addition to the minimum ₹1 crore) would be given to your family in case of your accidental death.
For example, if you have a ₹1 crore term insurance policy and an accidental death rider of ₹50 lakh, your family will get ₹1.5 crore in case of your accidental death. This leaves your family better protected financially in already stressful situations.
Points to Note:
- Definition of Accidental Death: Go through the policy document to know what would be considered an accidental death.
- Premium Cost: Like the critical illness rider, this add-on will charge your premium as well.
Why Use Riders in a ₹1 Crore Term Insurance Policy?
Including riders such as critical illness and accidental death benefit will turn your term insurance policy into an even better safety net.
A ₹1 crore sum assured may soundastronomical but these riders take care of extraordinary situations that a regular policy cannot.
Advantages of Adding Riders:
- Customizable Coverage: Personalize your policy to suit your requirements.
- Cost-Effective: Riders are cheaper compared to buying individual policies.
- Better Financial Security: Offers additional cover for life’s uncertainties.
Drawbacks to Watch Out For:
- Increased Premiums: Adding several riders can increase your policy’s cost.
- Complicated Terms: Riders have terms and conditions that require reading carefully.
How to Pick the Best Term Insurance Plan for ₹1 Crore?
Choosing the best term insurance plan for 1 crore is a serious matter, where your requirements and preferences have to be taken into consideration carefully. The following guidelines will assist you in doing so:
- Decide Your Coverage Needs: Go beyond the minimum sum assured. Consider likely medical costs, outstanding loans, and future financial plans for your dependents. You can decide whether to opt for riders such as critical illness or accidental death.
- Compare Premiums: While affordability is necessary, don’t compromise on coverage for a low premium. Compare premiums online with calculators and those offered by various insurers.
- Check Claim Settlement Ratio: The claim settlement ratio indicates the percentage of claims that an insurer has settled successfully. A high ratio indicates reliability.
- Read the Fine Print: Know the exclusions, terms, and conditions of the base policy and riders. In doing so, you will not be surprised when you or your family members need to file a claim.
- Select a Reputable Insurer: Select an insurer with good word-of-mouth reviews and good reputation within the insurance market.
The Role of Awareness in Choosing Term Insurance
It is a common fallacy most of us commit by presuming that a ₹1 crore term insurance policy insures everything in life.
This may create surprises at the time of claim which are not nice. In order to stay away from it, invest some time in:
- Comparing policies.
- Consulting an insurance planner if necessary.
- Searching online for information to get to know term insurance nuances.
Conclusion
A ₹1 crore term insurance is certainly a step towards securing the financial future of your family. But let’s see what all it includes and what all it does not.
Critical illnesses and accidental death are generally not part of the basic cover but can be opted for as riders.
With good analysis of your requirements and selection of suitable riders, you can have an overall cover for your family members.
Keep in mind that the ideal term insurance policy for ₹1 crore would be one that suits your individual needs and allows for adjustments as your needs change. Always be prudent, as when planning for your family’s future, there is no scope for compromise.
