Personalise Your Protection: Customizable Term Insurance Policies Demystified

Have you ever wondered if a standard-term insurance plan will cover all the risks and uncertainties in your life? While term insurance is a crucial financial tool, it may not address every specific need. Life is unpredictable, and there are situations where a basic term insurance plan may fall short. This is where customization comes into play.

Customizable term insurance policies allow you to enhance your coverage based on your unique requirements. By adding riders to your policy, you can tailor it to suit your individual needs.

Some common riders available for term insurance policies in India

Riders are additional benefits that offer extra financial protection above the base policy’s sum assured. They can be attached to various types of life insurance plans, including term plans, endowment plans, money-back plans, and unit-linked insurance plans.

1. Accidental death benefit rider (ADB)

Accidents can happen at any time and can result in devastating consequences. The ADB rider provides an additional sum assured if the policyholder dies due to an accident. For example, if the base sum assured is ₹25 lakhs and the ADB rider sum assured is ₹10 lakhs, the total claim amount would be ₹35 lakhs in case of accidental death.

2. Accident and accident disability benefit rider (ADDB)

Unlike accidents that result in death, some accidents can lead to disabilities. The ADDB rider covers both accidental death and disability caused by an accident. Depending on the insurer, this rider may provide coverage for total and permanent disability or temporary disability as well. In the case of disability, some insurers may offer a ‘waiver of premium’ benefit, where future premium payments are waived until the end of the policy term or the death of the insured life.

3. Waiver of premium rider (WOP)

Total and permanent disability can have a significant impact on your ability to earn an income and pay your premiums. The WOP rider ensures that if you become totally and permanently disabled due to an accident, all future premium payments under the base policy and any attached riders will be waived off until the end of the policy term or the death of the insured life.

4. Critical illness rider (CI)

Critical illnesses can be financially draining, often requiring expensive treatments and care. The CI rider provides additional cover in case the policyholder is diagnosed with a critical illness such as cancer, heart attack, kidney failure, or stroke. The payout is usually equal to the sum assured of the base policy and helps cover medical expenses and loss of income during treatment.

5. Term assurance rider

The term assurance rider enhances the risk cover of your base policy at a minimal cost. It provides an additional sum assured in case of death during the policy term. Some insurers offer monthly payouts instead of a lump sum payment, providing financial stability to your family in regular instalments.

Customizing your term insurance policy

When customizing your term insurance policy, there are several aspects you should consider:

1. Premium payment frequency

Most term insurance plans offer flexible premium payment options to suit your convenience. You can choose to pay premiums yearly, half-yearly, quarterly, or even monthly. Consider your cash flow and choose a payment frequency that aligns with your financial situation. Set up auto-debit or standing instructions to ensure timely premium payments and avoid policy lapse. You can use an online term insurance calculator to calculate the premium of your policy.

2. Claim payout options

Choosing the right claim payout option is crucial for the financial well-being of your family. Insurance plans provide various options for how the claim amount is paid out to your nominee:

Lump-sum: The entire claim amount is credited to your nominee’s bank account, which can be used to pay off any outstanding loans or other liabilities.

Monthly income: The claim amount is paid to your family in fixed monthly instalments for a certain period. This option is beneficial if you want to ensure a regular income stream for your family’s day-to-day expenses.

Lump-sum with monthly income: A combination of the two options, where a part of the claim amount goes towards paying off loans, and the rest is provided as a monthly income for a fixed duration.

Consider your family’s financial aptitude and choose an option that provides maximum financial security and stability.

3. Premium pay model

While term insurance policies typically require annual premium payments, some insurers offer alternative premium pay models. For example, limited pay allows you to pay off your premiums in larger instalments over a shorter period while enjoying coverage for a longer duration. This option can be beneficial if you want to quickly get rid of payment liabilities or have unpredictable income in the future.

Benefits of customizable term insurance policies

Customizable term insurance policies offer several advantages:

1. Enhanced Coverage: By adding riders, you can enhance your coverage beyond the base sum assured, providing additional financial protection for specific events or circumstances.
2. Tailored Protection: Customization allows you to align your policy with your unique needs and requirements. You can choose riders based on your lifestyle, occupation, and personal circumstances.
3. Cost-Effective: Riders are often more cost-effective than purchasing separate insurance policies for specific needs. For example, a critical illness rider can offer comprehensive coverage at a lower cost compared to standalone health insurance plans.
4. Flexibility and Convenience: Customizable term insurance policies provide flexibility in premium payment frequency, claim payout options, and premium pay models. This allows you to customize your policy based on your financial situation and preferences.

Conclusion

Customizable term insurance policies empower individuals to personalise their protection based on their specific needs and requirements. By adding riders, policyholders can enhance their coverage beyond the base policy, providing additional financial security for various life events. From accidental death benefits to critical illness coverage, riders offer tailored protection at a cost-effective price.