Term insurance is a popular and affordable life insurance option that offers coverage for a specific period. While it is an essential component of financial planning, term insurance may not cover all the risks you and your family may face. This is where optional benefits in Term Insurance come into play. These optional benefits provide additional coverage that can enhance your policy coverage and provide financial security to your loved ones in case of critical illness, disability, or accidental death. In this article, we will explore the optional benefits of term insurance in India, how it works, and how it can provide comprehensive coverage.
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Term insurance provides pure death benefit protection where the policyholder's family receives the sum assured if the insured dies during the term. For a small, affordable premium, term plans offer large coverage amounts at low cost purely towards the financial security of dependents when one is no longer around.
Payouts help surviving kin handle debts, daily expenses, and childcare without income shortfalls at difficult times. Terms ranging from individual needs - 10, 20, 30, or more years are chosen based on family goals. Monthly premiums also stay generally economical relative to high coverage.
Ramesh is a 35-year-old software engineer earning a decent living to support his wife Anita and 2 young kids. He realises that if tragedy befalls him prematurely, his family will suffer significantly without his income to cover expenses, loans, housing, child needs, etc.
So Ramesh purchases a Rs 1 crore term life insurance policy with a 30-year term at an affordable Rs 12,000 annual premium. This term plan guarantees that should Ramesh, unfortunately, pass away in the next 30 years, his family will receive the full sum assured of Rs 1 crore immediately from the insurance company.
This Rs 1 crore tax-free payment gives Ramesh tremendous mental peace since this lumpsum payout can clear all significant liabilities and ensure lifetime financial security for Anita and the kids to maintain their current lifestyle even without him around. Though the high coverage is for just a 30-year policy term, the low premium makes term insurance well worth it.
Suppose Ramesh survives till age 65 at term expiry. In that case, nothing is payable to him or his family from the policy as it offered pure protection benefit until then to handle adversities that, fortunately, didn't arise.
So, Ramesh managed to shelter the family's future at a low cost through a term plan tailored for loss of income needs rather than mixing savings and investment aspects.
Some of the most important features of a Term insurance plan are as follows.
| Affordable plans | Tax benefits | Add-ons |
| Easy to buy | Flexible payout options | Flexible premium payments |
An add-on, also called a rider, offers optional benefits at a low cost. These can be added to your Term Life Insurance Plan. Most insurers provide many add-ons at the time of the purchase or renewal of a base plan. In simple terms, optional benefits are a way to boost a Term Insurance plan.
Some benefits of add-ons/riders with a Term Insurance Plan are as follows.
Managing one policy with multiple riders is way more convenient than managing multiple policies. This applies to all the initial formalities of purchasing plans and then making premium payments towards each. In case of a payment default, one may lose all previously paid premiums, or an additional fee might be charged, depending upon the insurer's conditions. To avoid such incidents, one basic plan with added riders can be purchased.
The premiums paid towards Term Insurance policy along with riders are exempted from tax under Section 80C of Income Tax Act.
Note: The tax benefits on life insurance are only tax free under the old tax regime. Payouts above Rs. 5 lakhs are taxable under the new tax regime for policies bought after April 2023.
Each individual has different financial needs and commitments. Therefore, one basic plan falls inadequate to meet such a wide variety of demands.
This is where the option to customise a plan is most beneficial. A good example can be a person who has a history of cancer in the family. An additional Critical Illness Rider can help him meet the financial challenges and costs in case he is diagnosed with cancer during the policy period.
He can meet all the medical expenses that come along, leveraging the basic death benefits as well in case he passes away.
The Optional Benefits can make a base plan more robust and comprehensive. These benefits can be chosen at the time of the policy purchase. Some of the important add-ons/riders available with a Term Insurance plan are as follows.
A critical Illness rider receives a lump sum at the time of diagnosis. The illnesses covered by this rider are listed in the policy document. Term insurance usually covers several Critical Illnesses, such as heart attack, cancer, and stroke. You can explore ACKO Life Critical Illness Benefit Rider. This unique rider covers 21 critical illnesses, including life-threatening common diseases among women, such as breast cancer, cervical cancer, fallopian cancer and ovarian cancer.
With regards to life insurance, “the number of policies issued to women in the year 2022-23 is around 97.38 lakhs, which is 34.20% of the total”, as per the IRDAI.
A basic Term Insurance plan will help you with the sum assured as a death benefit. An additional Accidental Death Benefit rider can increase this compensation. In this case, the beneficiary is paid a supplementary sum in case the policyholder passes away due to an accident. This is a great way to provide your family with additional financial security in your absence. Explore ACKO Life Accidental Death Benefit Rider and its benefits.
Loss of income may be due to multiple reasons. This may result in an inability to pay the premiums of a policy. It can lead to the loss of death benefits. Waiver of Premium helps you waive premiums in case of loss of income or disability. The policy remains active even in non-payment of premiums.
An unfortunate event like an accident can result in permanent or partial disability due to the loss of a body part or an impairment in body functioning. This might even result in a loss of income. This is where the Disability Rider can substitute the loss of income for the entire family. This rider can pay the policyholder an entire amount in the event of total disability. In case of partial disability, a partial sum assured is paid as per the terms of the plan. Explore ACKO Life Accidental Total Permanent Disability Benefit Rider’s unique features and benefits.
This rider ensures a regular sum for a pre-established length of time after the death of the insured person. This helps your family have an income for several years in your absence. This is most advisable for the sole breadwinners of the family.
ACKO Life Flexi Term insurance breaks the mould of standard term plans, which lock you into fixed coverage for life right at policy purchase. ACKO's plan acknowledges life's uncertainty and gives customers unmatched power to customise protection as responsibilities and priorities change over time.
For instance, if you have a young family now but foresee expenses rising later as parents age or kids go to college, the ACKO Life Flexi Term plan enables you to easily enhance the sum assured to match growing needs.
Factors that affect the calculation of premiums for Term Insurance are as follows.
Premiums depend heavily on age at the time of buying cover. Younger buyers get lower quotes.
A higher sum assured implies larger premiums to fund more significant risks insurers take.
Long 40-year terms mean paying longer to cover mortality risk over decades.
Pre-existing health issues lead to higher premiums or declining proposals. Clean history ensures the best rates.
Better settlement records mean more trust and competitive premiums.
Other factors influencing premiums include gender, smoking habits, choice of riders and occupation.
Term insurance delivers exceptionally cost-effective pure-risk coverage to secure incomes for dependants when gone. Meticulously identifying needs around goals, loans, and responsibilities guides prudent sum assured and rider selections. Updating covers periodically as income and priorities evolve ensures adequate protection. Adding optional benefits such as critical illness, accidental death, disability rider, etc., enhances the basic plan's coverage.
Here are some answers to the most common questions regarding optional benefits in term insurance
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.
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Reviewed by Vaibhav Kumar Kaushik 
Acko Technology & Services Private Limited
#36/5, Hustlehub One East, Somasandrapalya, 27th Main Rd, Sector 2, HSR Layout, Bengaluru, Karnataka 560102
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