What Is Term Plan with Critical Illness Benefit?
Having adequate life insurance coverage is essential to ensure that your family is taken care of financially in your sudden absence. The simplest and most economical way to achieve this is by buying a term plan.
What is a term plan?
Until a few years ago, life insurance policies were available as an endowment, money-back, and whole life plans. However, often the premium on such policies was high and made it unaffordable for most people to avail of higher sum assured (SA).
To overcome this limitation, insurance companies now offer term insurance. However, many people still wonder, “what is term plan”. It is a pure life cover that pays the benefits to your nominees in case of an unfortunate event during the policy duration.
The premium on term plans is lower when compared to traditional life policies due to two reasons. First, term insurance does not include any investment component, which means the entire premium is used towards providing life coverage. Secondly, insurers do not provide any maturity benefits if you survive the policy tenure.
Term insurance plans with critical illness benefits
Various reasons, such as unhealthy eating habits, sedentary and stressful lifestyles, and inadequate sleep have resulted in the rise of critical ailments, such as heart diseases, cancer, and liver disorders. Such critical conditions may significantly affect the quality of your life and are expensive to treat.
Rising healthcare costs further add to your financial burden if you get diagnosed with a critical ailment. Several term insurance plans in India are available that provide coverage for these illnesses. Such types of term plans pay the benefits in case of diagnosis of any critical ailment included in the policy document.
Here are four reasons why you must opt for critical illness benefit along with your online term insurance policy:
1. Constant premium
It is a common misconception that you may have to pay a higher premium if you are diagnosed with a critical disease. However, when you opt for this additional benefit to your base policy, the premium remains constant even if you are diagnosed with an included critical condition. Some insurers may also waive off future premium payments if you are diagnosed with an ailment mentioned in the policy document.
2. Coverage for medical expenses
Treating a critical ailment is expensive due to rising healthcare costs. Moreover, such an illness lasts for a longer period. Without sufficient insurance coverage, you may find it impossible to meet these treatment costs. With critical illness cover added to your online term insurance policy, you receive a lump sum payout on a positive diagnosis. You can use this money to pay for your treatment or as an income replacement. Alternatively, you may use these funds to pay any liabilities, such as a car or home loan.
3. Tax benefits
The premium paid for buying term insurance in India is eligible for tax deductions under section 80C of the Income Tax (IT) Act, 1961. The maximum tax benefit is capped at INR 1.5 lakh per annum. Additionally, the plan benefits received for critical illness or due to an unfortunate event during the policy duration are tax-exempt under section 10(10D) of the Act.
4. Peace of mind
Without insurance coverage, meeting the high treatment costs for a critical ailment may be financially stressful. You may be unable to afford the treatment from a good facility due to a lack of funds, which may increase the complications and have severe outcomes. However, with the critical illness benefit added to your term insurance plan, you receive the lump sum payout on diagnosis, which you can utilize to cover treatment costs. Therefore, you and your family can live stress-free by just focusing on treatment and recovery.
Before you opt for this coverage, check the illnesses included and excluded from the plan.