COVID-19: How the pandemic re-emphasizes the need for Term Life Insurance
The COVID-19 pandemic has created wide-spread panic in the minds of people and the worries are mounting with each passing day. The number of COVID-19 cases is witnessing an upward trend even though the entire country was put on complete lockdown for a significant period.
Coronavirus has not only resulted in a new normal but it has also re-emphasized the importance of Term Insurance. Existing policyholders are seeking information from respective insurance companies whether the existing term insurance policy provides COVID-19 cover.
Importance of Term Insurance in the time of a pandemic
Before you gift yourself a good term insurance plan for safeguarding your family members from COVID-19, it is necessary to understand the importance of term insurance. It has become an absolute necessity in these unprecedented times.
Term life insurance is the most cost-effective form of life insurance that provides financial protection to the nominee if the policyholder passes away during the policy term.
The Cost-effectiveness of term insurance comes from the fact that it provides higher life cover at relatively lower premiums.
The cycle of premium payment depends on the option that is chosen by the policyholder. In the wake of the COVID-19 outbreak, people across India are preferring term life insurance over other forms of life insurance.
Covid-19: Health and term insurance covers gain traction
People who were procrastinating buying of term insurance are now showing an urgency driven by the fear of contracting Coronavirus infection.
Primary reasons for buying Term Life Insurance
Term life insurance products have witnessed a significant jump since the lockdown started, as people are worried about their financial dependents, in case some untoward incident occurs due to pandemic.
Here are some of the major reasons for buying term insurance:
- If the policyholder passes away (due to some incident or illness), the nominee can utilize the money obtained from the term insurance for meeting family expenses and fulfilling planned goals like investing in a child’s education.
- If you have not taken loans for securing assets like car, flat, etc.; your family might not feel the burden since there is no debt to clear. However, this scenario is unusual as most people take loans to fulfill their dreams. The term insurance payout that your family receives can be useful in clearing your debts.
- Some term insurance policies also offer protection to the policyholder by offering critical illness protection. This protection can be worthwhile considering the risks associated with modern lifestyle changes.
- Term insurance policies also help in tax-saving. The premiums paid are deductible from taxable income under the Section-80C of the Income Tax Act, 1961. The maturity amount that is received as per the insurance policy is exempt subject to the conditions under Section 10(10D).
- The three major benefits of an effective term insurance policy are tax saving, life protection, and most affordable premiums in comparison to different forms of life insurance.
Who should buy Term Life Insurance
Claim Settlement Ratio, solvency ratio, flexibility for adding critical illness benefit, and the option for adding accidental death benefit are some of the important parameters that should be considered when evaluating a term insurance plan.
Whether you are a working professional or retiree or an entrepreneur or working woman, term insurance offers a host of benefits catering to the needs of the policyholder.
Common Term Insurance Riders
Most of the basic term life insurance policies can be enhanced by adding relevant add-ons (or riders) to the policy at a nominal price. For riders such as critical illness rider or terminal illness rider, the policyholder needs to meet the pre-requisites before opting for the add-ons.
Life insurance policies including term life insurance cover death caused due to health issues, including Coronavirus. ICICI Prudential Life Insurance offers ICICI PruiProtect Smart Policy, under which the nominee gets the benefits (or sum assured) if the policyholder passes away due to COVID-19.
Policyholders have to be aware that the COVID-19 claims are subject to applicable T&C of policy contract and extant regulatory framework.
Conclusion
Term insurance is the most essential investment vehicle, especially when we are living on the edge due to the on-going pandemic in the country. It is necessary to check with the insurer if COVID-19 is covered under the chosen term insurance policy.
