1. Which product categories are in demand these days, and why?
The pandemic accelerated awareness of a financial plan that encapsulates protection and long-term savings to provide financial security. This has resulted in increased traction for term insurance products coupled with critical illness benefits. Besides, demand for non-linked saving products has also grown since they provide safety of capital and stable returns.
In the first half of 2020-21, our protection segment's share grew to 20 per cent from 14.8 per cent in the previous corresponding period. Likewise, non-linked savings business grew 45 per cent during the second quarter of the fiscal year, against the previous corresponding period. Annuity products have also registered a robust 73% year-on-year growth for the quarter.
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2. How to calculate adequate cover for term plans?
Our estimate is that only 10% of India's addressable population has some income protection, highlighting the country's under penetration. It is essential to buy adequate life cover that is sufficient for paying off all liabilities and enables the family to continue with their lives in case of eventualities.
A Human Life Value Calculator can be used to arrive at a figure for adequate life cover. Individuals up to 40 years need life covers equivalent to 20-30 times their annual income. For individuals between 40 and 50 years, life covers 10-15 times their annual income are recommended. These should ideally be five times an individual's yearly income if the customer is over 50.
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4. How do add-ons work and what kind of riders are in demand?
Nowadays, along with term insurance products, insurers offer add-on benefits. These are critical illness riders that pay the sum assured on diagnosis of a set of defined illnesses. These include permanent disability or accidental death, following which the sum assured is increased, and premiums waived.
Ailments related to heart, chronic lung & liver diseases, and kidney failure are few life-threatening illnesses covered under the plan. Premiums for these remain constant for 30 years. The policyholder also receives the entire critical illness cover on being diagnosed with any of the illnesses. It gives them the freedom to choose their treatment method.
In other words, riders make term insurance coverage robust and comprehensive, covering more than just the finality of demise.
5. Are these costly?
These are available at affordable rates, and anyone can customise them to suit their requirement. One of our products offers a 30-year-old non-smoking individual a life cover of ₹1 crore for a premium of approximately ₹ 881 per month. The policy remains in force for 30 years. Besides, a critical illness cover of ₹ 10 lakh that offers insurance against 34 illnesses costs a small ₹ 298 per month.
6. Can you elaborate on the importance of opting for an annuity plan for planning retirement keeping in mind the uncertain times we are going through?
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With rising inflation, increasing healthcare costs, non-existent social security and higher life expectancy, there is an increased need for retirement planning. A plan that would enable a person to continue leading a financially independent life.
Annuity policies offered by life insurers, provide a route to live a comfortable retired life by providing regular income. These products provide a steady, guaranteed income for life after making a lump sum investment.
An array of products designed to meet diverse retirement needs are available. They guarantee a regular income for life and payments could be monthly, quarterly, half-yearly or yearly. The plan also provides 'Return of Purchase Price' option on death, critical illness or permanent disability due to an accident.
