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Investing in a term plan at an early age offers significant benefits, including reduced premiums. Additionally, it provides peace of mind, knowing that in the event of any unforeseen circumstances, your loved ones will be financially secure. Let’s illustrate this with a case study.
Mr Roy, a 40 year old business man is willing to invest in term plan (CLICK2PROTECT Elite) offered by HDFC LIFE. He has opted for a premium paying term of 10 years annually on a sum assured of Rs 2 crore. (Policy Term – 35 Years)
Plan Name – HDFC Life CLICK2PROTECT Elite
Age – 40 years
Sum Assured – 20,000,000
Premium Paying Term – 10 years
Mr Ajay, a 30 year old business man is willing to invest in a term plan (CLICK2PROTECT Elite) offered by HDFC LIFE. He has opted for a premium paying term of 10 years annually on a sum assured of Rs 2 crore. (Policy Term – 35 Years).
Plan Name – HDFC Life CLICK2PROTECT Elite
Age – 30 years
Sum Assured – 20,000,000
Premium Paying Term – 10 years
Conclusion
Mr. Ajay, at the age of 30, demonstrated astute financial planning by investing in the same insurance plan and benefits as Mr. Roy.
Over a period of 10 years, Mr. Ajay paid a total premium of Rs 4,55,420, while Mr. Roy’s total premium amounted to Rs 8,02,640.
Remarkably, Mr. Ajay managed to save a significant Rs 3,47,220 on the same plan simply by investing wisely and choosing the opportune moment to secure his future.
Life insurance riders are supplemental benefits added to a primary insurance policy, activated by specific events, offering additional financial protection beyond the basic sum assured. Even if a rider is utilized, the original life cover remains intact, ensuring eligibility for the death benefit. Various types of riders cater to diverse needs:
These riders can be attached to any insurance plan. Policyholders should select riders based on individual and family needs to bolster life cover and ensure comprehensive financial security.
Consider the Accidental Death Cover provided by HDFC Life Protect Rider.
By selecting this supplementary rider, the insurance company agrees to cover the premiums in the event of an unforeseen circumstance affecting the policyholder. Let’s delve deeper into this concept with a case study.
Mr. Ahuja planned to invest in a Smart Income Plan for his 10-year-old son, intending to pay an annual premium of Rs 1,03,271 for 12 years. Additionally, he chose to include an Accidental Death Cover through HDFC Life Protect Rider by paying an extra Rs 3271. Tragically, Mr. Ahuja passed away in an accident during the fourth year of his premium payment term.
As Mr. Ahuja had chosen the Rider, the insurance company will cover the remaining premiums, ensuring the policy stays active. Consequently, his nominee will smoothly receive the plan’s benefits without any hassle.
Mr. Avi plans to invest in a Smart Income plan for his 10-year-old daughter, intending to pay an annual premium of Rs 1,00,000 for 12 years. He decides against opting for a rider as it would require extra payment. Sadly, Mr. Avi passes away in an accident during the third year of his premium payment term.
As Mr. Avi had not selected the Rider, the insurance company won’t cover any outstanding premiums, and his policy may lapse if the premium remains unpaid by any method.
Conclusion
Mr. Ahuja’s policy remained active with just an additional investment of Rs 3271, showcasing the protective benefit of a Rider. Conversely, Mr. Avi’s policy is now at risk of lapsing if the premium remains unpaid, highlighting the importance of a Rider in providing added protection against unforeseen circumstances.
Mr Aditya, a 30 year old business man is willing to invest in Click 2 Protect Life by HDFC LIFE. He has opted for a Regular premium paying option annually for a policy term of 30 years. The sum assured is Rs 1 crore with a protection cover till age 60.
Age – 30 years
Sum Assured – 10,000,000
Premium Paying Term – Regularly for 30 years
Policy Term – 30 years
Premium amount- Rs 72,656 Annually
Maturity Benefit : Rs 21,79,680
Mr Bose, a 30 year old business man is willing to invest in in Click 2 Protect Life by HDFC LIFE. He has opted for a limited premium paying term of 5 years for a policy term of 30 years. The sum assured is Rs 1 crore with a protection cover till age 60.
Age – 30 years
Sum Assured – 10,000,000
Premium Paying Term – 5 years
Policy Term – 30 years
Premium amount- Rs 1,21,191 Annually
Maturity Benefit : Rs 6,05,955
Conclusion
Upon calculating the premiums, it is clear that although Mr. Bose’s annual premium is higher than Mr. Aditya’s, the total premium paid by Mr. Bose over the policy term is significantly lower. Both will receive the same maturity and death benefits according to their premium amounts. By choosing the limited pay option instead of the regular pay option, Mr. Bose has saved money while securing the same plan and benefits as Mr. Aditya. This highlights the financial advantage of opting for a limited pay option.