One of our clients recently had a concern while he was about to purchase a term insurance plan. Now, while helping him out, our advisor used our free term insurance cover calculator to compute his ideal term insurance coverage (since “one size” doesn’t fit all in the case of term insurance plans). This accounted for the age of his dependents to estimate how many years it would take them to get financially independent, apart from issues like inflation, existing financial obligations, and more.
However, he was concerned that while they had no plans to have a child in the near future, he wasn't sure if they would change their minds about it in the future. Since term insurance generally doesn’t allow a boost in the base cover, he wanted to know what he would do if he had a child to support.
Our advisor offered him the perfect solution: “a life stage benefit” for his term insurance policy.
So, what is this life stage benefit in term insurance plans? Should you opt for such a perk? What are the best term insurance plans offering such perks? Here’s what our advisor explained to the client -
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What are Life Stage Benefit Riders in Term Insurance Plans?
Life Stage Benefits in term insurance policies are actually top-ups that kick in during major life events of policyholders - marriage, 1st and 2nd childbirth/adoption, and home loan. These top-ups add to the base cover amount. However, this boost happens only once for each occasion, and the sum assured is increased up to a capped limit as pre-decided by the term insurance provider.
Here’s an example of a policy to better explain this perk in term insurance plans -
So, if a policyholder (with term insurance of ₹2 crores)
- is unmarried and gets married in the future, the insurer offers a boost of 50% of the base sum assured that is capped at ₹50 lakhs (cover = ₹2.50 crores).
- A few years later, they have a child, and the insurer again offers a one-time boost of 25% of the base sum assured that is capped at ₹25 lakhs (cover = ₹2.75 crores).
This constant boost in the cover is meant to address the evolving life stage goals of the policyholder and tend to their changing financial requirements. However, like any financial product, this feature isn’t without its set of caveats (and pros too!) -
Should You Opt for a Term Insurance Policy with a Life Stage Benefit Rider?
Life Stage Benefits in term insurance plans are actually add-ons that appear as an in-built feature. This is a perk that offers policyholders the unique option to lend flexibility to a term insurance plan. Such flexibility of boosting a life insurance sum assured is not normally extended in vanilla term plans. Despite the appealing functionality of life-stage benefits in term insurance plans, they are financial products with a set of pros and cons. You need to weigh out the advantages and disadvantages of this benefit before you agree to opt for the perk -
- What are the Pros of Life Stage Benefit Riders in Term Insurance Plans?
- A boost in sum assured during life stage requirements - Term insurance providers don’t offer much scope to bring in many changes to the policy once it has been purchased. While this offers financial security to the insurers (since they are already offering a substantial amount against a nominal premium), it surely is a major hurdle for policyholders since there is a probability of changes introduced to his/her financial goals.
Under such circumstances, Life Stage Benefit is a major perk, especially in the case the policyholder is
- Unmarried (but has plans to have a family in the future)
- Married but has no children (but has family plans in the future)
- Unmarried (but has plans to adopt a child in the future legally).
2. What are the Cons of Life Stage Benefit Riders in Term Insurance Plans?
- Fixed window to inform insurers - If you want to get access to the boosted sum assured, you need to inform your term insurance provider within 6 months of the event's occurrence.
- An increase in term insurance premiums - While the add-on is free to avail, once your cover amount is increased, you should expect an increase in your premiums (age at the time of purchasing the policy will not be counted).
Now, all in all, life-stage benefits in term insurance seem like a great perk to have on your side. However, we would still prefer to have you opt for our free term insurance calculator and compute the ideal coverage. This would ensure that you do not pile on to your premiums. On the other hand, if you are a bit confused about your family plans for the future, you can always opt for this perk over any of the following term insurance policies from the best term insurance providers.
What are the Best Term Insurance Plans with Life Stage Benefit Riders?
- Bajaj Life eTouch: The term insurance plan offered by Bajaj Allianz Life is widely favoured. It is cost-effective and available in three versions:
- Life Shield,
- Life Shield Plus, and
- Life Shield Return of Premium.
These options feature different sets of riders, such as
Drawbacks: The plan lacks the Critical Illness Benefit Rider, Inflation Shield, etc.
2. ICICI Prudential iProtect Smart: ICICI Prudential Life offers only this term insurance option. The policy offers four choices for death benefit payouts:
- lump sum,
- income,
- lump sum plus income, and
- increasing income.
Additionally, there are four plan options with varying combinations of riders:
- Life,
- Life Plus,
- Life and Health, and
- All In One.
These plans feature benefits like the Waiver of Premium and Terminal Illness Benefit, the Waiver of Premium in case of Disability, the Accidental Death Benefit, and the Critical Illness Benefit.
Drawbacks: The insurer’s overall operation proficiency is a bit concerning.
3. TATA AIA Sampoorna Raksha Supreme: The plan provides three options for death benefit payouts:
- Life Option,
- Life Plus Option, and
- Life Income Option.
It comes with built-in features like terminal illness benefits, life stage benefits, flexibility in premium payments, and the option to top-up the sum assured. The policy is comprehensive and cost-effective, offering riders such as Accidental Death Benefits and coverage for Accidental Total and Permanent Disability, among other benefits.
Drawbacks: The insurer needs to work on enhancing the overall operational efficiency to ensure that policyholders enjoy a seamless claim settlement process.
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Conclusion
Life stage benefit in term insurance is a lucrative add-on to have in your policy. While the addition of this perk won’t cost you a dime, once activated, you will surely be looking at higher premiums. So, it would be preferable to have a buffer sum assured added to your base cover from the very first.
