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Critical illnesses can wipe out the savings of households. For example, the cost of heart or brain surgeries or liver resections can run into lakhs. The harsh reality is critical illnesses come announced and can hit anyone. Investing in a savings plan can help families prepare for such eventualities. In this article, we share ideas to protect your wealth during a critical illness.
A critical illness is an illness or a disease that could be expensive to treat. Such an illness is also likely to impact the earning capacity of affected individuals. Examples of such critical illnesses include heart attack, cancer, kidney failure, etc. When a critical illness hits the earning member of a family, it causes a double blow in the form of income loss for the household and increased medical expenses.
First, let us understand how a savings plan works. A savings plan or regular income insurance is an insurance plan that offers regular income to policyholders. A savings plan provides the dual benefits of savings and insurance. Traditional term insurance plans provide a sum assured only on the death of the policyholder. However, a savings plan offers regular income and a cover against the untimely death of the policyholder. In addition to regular income, if the policyholder survives, they also get a maturity benefit. A savings plan can come with or without a critical illness rider1. We explain both scenarios below.
Let us assume you take a regular income insurance plan for 25 years and choose a premium paying term of 10 years. If you meet an untimely death during the first 10 years, your family will get a sum assured as part of the death benefit. If you survive the first 10 years, from the 11th year, you can start earning a regular income till the 25th year. If you survive the entire term, you will also get your premiums back at the end of the 25th year.
When you take a regular income insurance plan with a critical illness rider1, you can get all the benefits mentioned above. In addition, you will also get the benefits of critical illness cover, which will help you protect your income.
If you suffer from a critical illness at the end of the 4th year, you will get regular income from the 4th year until the end of the policy term. You no longer need to pay any premiums. At the end of the term, you will also get the premiums paid for the first 3 years. So, your family will get an assured regular income and all the benefits of critical illness cover.
Suppose you are looking at options for savings. In that case, you have the traditional options, such as bank deposits, investment in mutual funds, investment in government schemes like public provident fund, etc. All these options provide the benefit of wealth appreciation over the savings period. However, none of these provide the benefit of insurance cover against death and critical illnesses. A savings plan not only allows you to save money but also provides several benefits. These are discussed below.
A critical illness rider1 provides the benefits of critical insurance cover, such as coverage against major illnesses. These illnesses include cancer, cardiac conditions, and other illnesses, such as liver failure, blindness, kidney failure requiring regular dialysis, etc. The payout, if required, is possible at any time as long as the critical illness is diagnosed before maturity.
Policyholders can choose the payment frequency of receiving the regular income under a savings plan. The default payment frequency is annual. However, policyholders can also opt for monthly payments of their regular income due.
Policyholders can choose an income period for receiving income based on the policy. For example, if they choose an income period of 25 years, they will receive regular income for the next 25 years after the premium paying term (e.g., from 11th to 25th year if the premium paying term is 10 years).
A savings plan allows you the flexibility to choose premium payment terms, such as monthly, quarterly, half-yearly, annually, or a single premium. You can choose the term based on your income and cash flows. For example, if you expect an annual bonus2, you can opt for an annual premium payment.
Premiums paid towards a savings plan are eligible for income tax* benefit under section 80C. As of 2021, you can get a benefit of up to ₹ 1,50,000 by investing in a savings plan. You can use the funds to further invest in a savings instrument of your choice.
If the policyholder survives the policy term, they can get maturity benefits. The maturity benefit includes regular income and return of premium paid at the end of the policy term. If they die during the policy term, their survivors can get a death benefit.
A critical illness can be a harrowing event for a family. The absence of a regular income during a critical illness can make things worse. A regular income plan with a critical illness rider1 allows you to set aside funds for such an event. If you develop a critical illness during the premium term, you can benefit from the regular income. If you do not develop a critical illness, you can benefit from the maturity benefits and also get a return of premiums paid. Clearly, investing in such a savings plan is a wise choice.
Tata AIA Life Insurance Fortune Guarantee Plus(110N158V01) is an individual life insurance savings plan with an optional critical illness rider1. The plan provides coverage against 40 critical illnesses and allows choosing from an income period of between 20 and 45 years.
Click here to buy critical illness cover under Tata AIA Life Insurance Fortune Guarantee Plus(110N158V01) online.
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1Rider is not mandatory and is available for a nominal extra cost. . For more details on the benefits, premiums and exclusions under the riders please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office
2These bonuses are not guaranteed in nature. The Company may declare Cash Bonus rate annually in advance. The Cash Bonuses if declared, will be applicable provided all due premiums have been paid
Insurance cover is available under the product.
The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not a guaranteed issuance plan and it will be subject to Company’s underwriting and acceptance.
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This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
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