Dec 23, 2018,

5 Basic Financial Steps Too Simple Not To Take

John Schneider and David AutenContributor

Personal FinanceCashing in on fabulous with queer money.

Financial professionals and novices alike often make money harder than needed. Taking charge of your financial life can seem daunting only because there’s so much to consider.

5 Basic Financial Steps To Simple Not To TakeGETTY

Save three to six months’ worth of living expenses in an emergency savings account. Contribute enough in your 401(k) to earn your company match. Set up 529 Plans for the little ones. Get life insurance, a will, long-term care insurance and advance medical directives. Oh, and review your beneficiaries every year.

It’s a lot, but we can make it easier. That’s why these five basic financial steps from this Queer Money™ podcast episode will help LGBTQ individuals and our families take major steps toward achieving that lofty goal of financial security.

Cover the basics with this Queer Money™:

The combination of this research, while seemingly disparate topics, takes an interesting snapshot of the financial state of the LGBTQ community as adults from parenthood through pre and post-retirement.

The state of the queer American family

America’s queer families are stressed when it comes to their money. For this study, queer families were defined as same-sex couples between the ages of 25 to 64 with household incomes of at least $50,000 a year and at least one dependent under the age of 26. Currently, nearly 40% of LGBTQ families no longer believe the American Dream is possible, while only 33% agree, leaving 27% unsure.

Broken down further, it comes down to money confidence. LGBTQ families have less confidence than non-LGBTQ families that they can achieve financial security, 36% and 46% respectively, meaning over 6 in 10 LGBTQ families lack financial confidence. This study also shows that queer families have a lack of confidence in achieving other important financial goals, as well. With 37% of American families having less than one month of living expenses saved in an emergency savings account, many queer families in America feel like they’re walking on the edge of a financial precipice.

Achieving financial goals, on the other hand, can feel like an uphill climb with the average LGBTQ family having $12,065 in credit card debt, not including other kinds of debt. With average credit card interest rates at about 13%, queer families are incurring about $1,500 in interest on that debt. This is why a step-by-step plan to help LGBTQ families and individuals pay off their debt could be their best next step in achieving financial security.

The state of the queer pre-retirees and retirees

By the time queer people near retirement, however, we seem to grow more money confidence. MassMutual’s survey shows that many LGBTQ pre-retirees and retirees are more confident than the general population in their retirement preparedness, in taking market risk, and in understanding investing. This study also shows, however, that LGBTQ pre-retirees (those within 15 years of retirement) plan to retire later than the general population, which may inflate our money confidence.

The study, also, showed that many LGBTQ pre-retirees and retirees tend to invest more aggressively than the general population. This may be a valid investment strategy for many LGBTQ people, but it’s contingent on each individual’s investment goals and objectives. The problem, however, is LGBTQ survey respondents were less likely to be working with a professional financial advisor. Thus, their portfolio allocations may not align with their stated investment goals and objectives.

Regardless, LGBTQ pre-retirees were more inclined to presume that their retirement incomes will outlast them and felt they’d need only between 75% and 90% of their pre-retirement income to live comfortably in retirement. Queer respondents who were recently retired, on the other hand, reported needing less than half of their pre-retirement incomes in retirement.

The five basic financial steps queer families and retirees should take

After sifting through the data, Campbell and Brokaski shared financial suggestions for the queer community, suggestions that apply to everyone.

1. Create a budget and stick to it

A budget should break down into three buckets. They are budget to achieve day-to-day financial goals, a budget to achieve short-term financial goals achieved within three to five years and a budget to achieve long-term financial goals that take five or more years to achieve. The daily budget should support the short-term budget that supports the long-term budget. You can start with a simple daily financial plan. (link to daily plan post)

A strategy for creating your budget is the bucket with rocks, pebbles and sand strategy. If you fill your bucket with sand first, it’ll be hard to add the pebbles and rocks. If you do the opposite and first fill your bucket with rocks, and then pebbles and then sand, you’ll get all three into the bucket.

The rocks are synonymous with your biggest or long-term financial goals, such as preparing for retirement. The pebbles represent smaller financial goals, such as qualifying for 100% of your employer’s 401(k) match. The sand represents your smallest goals, like sticking with your daily budget that lets you qualify for 100% of your employer match.

2. Reduce household expenses

Contrary to popular belief, most of us have a spending problem and not an income problem. The only way to be financially successful is to live below your means. Keeping more of your money and saving for financial goals requires a financial plan. Reducing household expenses is a critical step in that plan. After you’ve analyzed your spending in creating your budget, manage your spending with the help of a spending analysis to avoid budget creep or the increase in spending beyond your budget that happens so slowly you don’t even notice it. Therefore, a spending analysis should be done a couple of times a year to keep your budget aligned with your financial goals.

3. Build an emergency fund

Rather than focusing on saving three to six or six to twelve months of living expenses in an emergency savings account, set up a system to save a little bit of money in an emergency savings account with each paycheck. Over time, you’ll accumulate the financial security and confidence you desire.

To do this, open a basic, no-frills savings account at a separate bank or credit union from all your other accounts. This keeps your emergency savings “at arm’s length” and minimizes the chances you’ll tap it for non-emergencies. Set these contributions on auto-pilot by establishing a recurring direct deposit from your employer in this account with each paycheck. Finally, increase your contribution into your emergency savings account in proportion to pay increases and bonuses to expedite achieving your emergency account savings goals.

4. Find a trusted financial advisor

A study done by Prudential showed that LGBTQ people who use a financial advisor are more affluent, have nearly double the household income of those without a financial advisor and use more financial products, including life insurance, long-term care insurance and savings accounts. These same people are more likely to have an employer-sponsored retirement account, such as a 401(k) or 403(b) and are more likely to have an Individual Retirement Account (IRA). Likewise, they tend to have more money saved and invested.

It’s not entirely clear if having a more robust financial plan and more money saved and invested is a cause of or a correlation to having a financial advisor, but it’s worth considering hiring a financial advisor to get you started with a financial plan. As your assets grow and your financial situation becomes more complicated, hire your financial advisor to do more for you.

5. Build a retirement nest egg with a goal of 15 times your annual income

Finally, Campbell advises, work to build a retirement nest egg with 15 times your annual income. This may seem like an out of reach, even out of touch number for many, and that’s why we recommend the rocks, pebbles and sand strategy to financial planning above because it lets investors regularly take small steps that compound over time.

An interesting question that MassMutual asked participants of its State of the American Family Survey was “What is your biggest financial regret?” The reply was “Not starting early enough.” The solution, then, is to start today regardless of how early today actually is.

While financial planning may seem easier said than done, it doesn’t have to be as hard as we make it. Start with these five basic financial steps, and then advance to more advanced steps one step at a time.

After living fabulously the wrong way and accumulating $51,000 in credit card debt, we learned how to be even more fabulous and debt free. Now, we use our personal experience and nearly 30-years of combined financial services experience to talk about the unique financial need.

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Things to Consider While Choosing Best Term Insurance Plan

Prash B

17 Dec 2018 

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Most of us depend on financial advisors and chartered accounts to make financial decisions for us. On their advice, we buy insurance for tax benefits or as an investment. Some of us buy policies just because the agent is known to us or recommended by an acquaintance. What this means is that we buy policies that in most cases we do not need or is not suitable for us. We need to know how insurance policies work and which best term insurance plan is suitable for you.

To make an informed decision, you need to know something about insurance – how it works and what insurance you should opt for. Term insurance is an economic plan where you pay a lower premium than any other type of insurance. These plans offer you peace of mind for you and your family. So let’s look at Term Plan and its features, benefits, and advantages.

What is Term Insurance Plan?

Term Insurance plan is just like any other insurance cover since it provides pure protection and risk of the untimely death of the policyholder while the policy is active. It is a no-frills policy that is affordable and insures your family’s financial future. This type of insurance gives you higher life insurance coverage with the least possible insurance premiums. These affordable policies take care of your family’s goals like your child’s education and other financial obligations.

Why you Need Term Insurance Plan

Life is very uncertain and unpredictable - One moment you are alike and kicking and the next you are no more. What happens to the near and dear one that you have left behind? The family finds itself in dire straits with the breadwinner gone. When you set up term insurance, you can be at peace knowing that you will not leave your family in the lurch. Family members get a lump sum amount that can pay off any loans, pay for education and other financial obligations

How Does Term Plan Secure Your Family’s Future?

Every adult will have some responsibility towards their family in varying degrees. As a parent, you will definitely want your family to be financially stable when you are no more.

If you are not covered by an insurance policy, your family will be in a desperate condition and will not be able to carry on a normal life. In term insurance plan the family receives a fixed, assured amount when you pass away during the term of the policy. For instance, if you take a term plan for 30 years, your family can use this to meet their financial obligations.

Main Features of Term Insurance Plans

The main reason that people buy term insurance plan is that it covers your family when they need you most. It helps in meeting immediate needs and some other financial obligations that the family might have. Some of the features of term insurance plans include:

Flexibility

These plans offer flexible term from 5 to 25 years. Also, whole life cover is also available with term plans. While choosing a term plan take into consideration your family’s needs in the future.

Maturity Age

Identifying the correct maturity is important while buying a term insurance policy. Generally, you would like to be covered for most of your life- which would be around 75 years. The term insurance does just that.

Death Benefit

The beneficiary mentioned in the policy gets the death benefits. The benefit can be a lump sum amount or partial lump sum amount with a fixed amount on a monthly, quarterly, half-yearly or annual basis.

Critical Illness Cover

Recently, Insurers have also introduced Critical Illness cover for additional protection to the policyholder. These plans offer lump sum cash payout for the
The first diagnosis of critical illness like cancer, heart attack, kidney failure, etc. A nominal amount of additional payment is required to avail of this facility.

Disability Cover Rider

Under this Rider, the insurer will pay all future premiums in case the insured is permanently disabled. In this case, you are assured that your cover will continue even if you are unable to pay the premium due to your permanent disability

Add on Riders

Some insurers also offer riders for additional protection. These riders include disability riders, accidental death rider, income benefit rider, critical illness riders and waiver of premium rider, etc. Adding riders also increases the premium you have to pay.

What Makes These Plans Affordable?

The Insurer provides insurance life cover and pays the benefits only if the policyholder passes away during the term of the policy. In term insurance, you pay just 2-3% of your annual salary, and you get cover for up to 20 times your annual salary. This plan has the lowest administration and miscellaneous charges. Lastly, these plans have no investment value.

Different Modes of Payouts

Insurance companies offer different payouts for the nominee. These include:

• Lump Sum
  The nominee is paid the entire sum assured amount after the unfortunate demise of the policyholder
• Lump sum plus Monthly Income
  Under this plan, the nominee receives the half the amount of the sum assured, and the remaining sum is given on a monthly basis
• Income on a Monthly Basis

The assured sum is given regularly as a percentage of the assured sum from the first month of processing the death claim.

How is Term Insurance Premium Calculated

Several factors are considered while calculating your plan for term insurance. They include the following:

• Age (premium is lower for younger persons)
• Gender
• Current health condition
• Medical history of the family (any cases of mental illness, cancer, etc.)
• Health history of the individual. Before underwriting a policy, the individual must undergo a preliminary medical screening to check the eligibility of the individual. The check includes the individual’s cholesterol level, blood pressure, blood sugar, and other prevailing diseases.
• Smoking and drinking habits (affects life expectancy)
• Participation in adventure sports (motor racing, paragliding, mountain climbing
• Profession: Your profession is an important factor for determining your premium. Individuals working in high-risk jobs like shipping, aviation, oil, and gas, etc are at a higher risk than individuals with a desk job.
• Premium payment mode (annual payment is cheaper)
• Policy Tenure (premium is lower for longer tenure)
• Policy buying mode (cheaper to buy online )

What To Do After You've Purchased A Life Insurance Policy

Catherine SchnaubeltContributor

RetirementI write about retirement and wealth transfer planning.

GETTY

Many factors go into purchasing a life insurance policy that suits your needs. And, like any part of your overall financial plan, your insurance program doesn’t end once you’ve decided on a policy and purchased it. Certain decisions and actions should be taken over the policy’s life, beginning with deciding who should be the policy owner and determining how to fund the premiums, and then monitoring the policy on an ongoing basis to ensure that it continues to perform as expected and meet your objectives.

Ownership Options

You have several options when determining who should own the life insurance policy.

• The policy is owned by the insured. This option is the most flexible for making changes, such as selecting your designated beneficiaries or terminating the policy. Generally, policy proceeds are included in your estate for tax purposes upon your death.

• The policy is owned by a spouse or other family member. This option gives you less control if you are the insured but comes with potential tax deferral benefits. Upon your death, generally, the policy’s proceeds are excluded from your estate but included as an asset in the policy owner’s estate, even if the policy owner predeceases you.

• The policy is owned by an irrevocable life insurance trust (ILIT). With this option, the policy is considered an irrevocable gift to the trust, and the trustee controls the policy. Since policy proceeds are usually excluded from the estates of the insured and the policy’s beneficiaries, the trust provides potential tax and asset protection advantages.

Premium Funding

After deciding who will own the policy, the next administrative task is to determine which method of funding the premiums is most appropriate given your selection and circumstances. You may realize that a combination of strategies works best, which is not uncommon for many life insurance policyholders. To pay your premiums, one or more of the following techniques may be used.

• Pay outright
• Loan the funds to the policy owner or the trust
• Pay with existing trust assets if held in a trust
• Pay with the proceeds from terminating a grantor retained annuity trust (GRAT)
• Split the cost with another party, such as the trustee of an ILIT

You’ll need to make sure your premiums are paid on time to avoid losing your benefits. Additionally, trust-owned policies have unique administrative requirements that may need your ongoing attention.

Periodic Review

Once your policy is in place, it’s important to review it periodically to make sure it still meets your objectives, especially if you experience a life-changing event such as marriage, divorce, or additions to your family. It’s also a good idea to periodically review the financial strength of the insurance carrier for issues that may affect its long-term survival or ability to pay claims.

Since the complexities of insurance providers and life insurance policies can be vast, you may want to consult with a trusted financial advisor or insurance professional when selecting a policy and attending to administrative details. They can also help you monitor the policy and routinely reevaluate its features to make sure it’s appropriate for your personal circumstances and financial goals.

I am a managing director and senior wealth strategist in the Houston office of CIBC Private Wealth Management with over 35 years of industry experience. In this role, I am responsible for the development of integrated wealth management solutions.

How Much Life Insurance Do You Need?

How Much Life Insurance Do You Need?
Determine the type of policy that's most valuable to you and the amount of coverage you'll need.


By Maryalene LaPonsie, Contributor Dec. 6, 2018, at 12:00 p.m.

U.S. News & World Report
How Much Life Insurance Do You Need?


LIFE INSURANCE HAS garnered a reputation for being difficult to understand. Terms like whole life, portability and riders can be confusing, but some people get tripped up by a more basic question: How much life insurance do I need?

"Historically, life insurance has been an intimidating product to purchase," says Brittney Burgett, marketing and communications director for online life insurance agency Haven Life. However, there are a number of tools and resources available to help consumers select the right policy.

For instance, there are three ways to determine the right death benefit, and they range from simple rules of thumb to professional consultations. Regardless of how you determine how much life insurance to buy, remember that your needs will change over time. Plus, you'll need to determine whether you want term life, insurance for a fixed period of time, or whole life insurance, which includes an investment component and can gradually build cash value.

Read on to learn more about how to calculate how much life insurance to buy, understand different types of policies and get the best price.

How to Determine How Much Life Insurance to Buy
You might already have life insurance through your employer. It's a common benefit, and workers may be tempted to assume they don't need a separate individual policy. While some employers offer voluntary life insurance for workers who want to buy greater coverage that is offered through their benefits packages, these packages have pros and cons. Keep in mind group insurance policies may have lower premiums than individual policies. Still, the policies often aren't portable, which means you can lose your coverage if you leave your job.

"They may stop there and think it must be enough," says Tara Reynolds, corporate vice president of marketing and client acquisition for insurer MassMutual. "In most cases, it's not sufficient."

With that in mind, use one of the following methods to determine how much life insurance coverage you need.

Try a tried-and-true rule of thumb. The simplest way to determine the amount of financial coverage you will need from life insurance as a policyholder is to buy a life insurance policy that's equal to a certain multiple of your income, such as five, seven or 10 times your annual salary. Those with significant assets can use a lower multiple, while those with no savings may be better off with life insurance equal to 10 times their salary. Another rule of thumb is to start with a multiple of your income and then add your household debt, or $100,000 per child, to reach an appropriate death benefit.


"Often times, clients come in and we'll use that as a starting point," says Silvia Tergas, a financial planner with advisory firm Prudential Financial in Bethesda, Maryland. However, she notes this method doesn't work for stay-at-home parents who may not have an income but still need life insurance to pay for child care and other services they provide a family.

Use an online calculator. Aside from using a rule of thumb to determine the amount of income you'll need, use an online calculator. "Why just stick with a rule of thumb when you can fact-check that with a calculator?" Burgett asks.

Many insurers, including MassMutual and Haven Life, provide life insurance calculators that are free to use on their websites. After filling in a few details, such as any debt, expected college plans and children to provide a more exact figure for life insurance needs, you can get an estimation of how much life insurance you may need.

Seek advice from a professional financial advisor. To best determine how much life insurance you will need, talk to a professional advisor. "As a financial planner, I'm always focused on personal solutions," Tergas says.

An advisor can take a holistic look at your finances, available resources and family goals before making a personalized recommendation for life insurance. If you don't already have a financial planner, look for a financial advisor who isn't limited to selling insurance for a single company. Professionals who charge a fee for their service, rather than taking a commission from the sale, may provide a more objective recommendation.

An advisor can also steer you toward a reputable company, or you can search for a company that is highly rated by the Better Business Bureau or financial data firm A.M. Best. By using one of the three steps above, you can determine the appropriate death benefit and avoid paying for coverage you don't need.


Recalculate Your Needs After Major Life Events
Determining how much life insurance you will need is something you will have to reassess more than once. How much insurance you need in your 20s may be significantly different than what you might need in your 50s.

Experts suggest recalculating your needs after every major life event, such as a marriage, divorce, birth of a child or death in the family. Pregnant women who need coverage may want to apply for life insurance as soon as possible since complications later in pregnancy, such as preeclampsia or gestational diabetes, could affect someone's eligibility or premiums. If you already have a policy and need additional coverage, buy a second plan instead of replacing an existing one. A secondary, smaller policy may be cheaper, and having multiple policies can make it simple to reduce coverage if your need for life insurance decreases in the future. And after a major life event, double-check to make sure you don't need to update your beneficiaries along with your coverage amount.


To make the process easier, Tergas suggests her clients stop thinking about life insurance in financial terms. "Forget the terminology," she says. "Think for a moment that you've left this earth. What do you want to make happen for your family?"

That could be paying off the mortgage for a spouse, covering the cost of college for kids or providing enough income that a surviving parent doesn't have to return to work.

Once you know your answer, add up the amount of money it would take to make those things a reality and use that as your life insurance death benefit. After all, taking care of your loved one's needs and goals is the whole point of buying life insurance in the first place.

Maryalene LaPonsie has been writing for U.S. News & World Report since 2015

Choosing A Life Insurance Policy To Meet Your Needs

Catherine SchnaubeltContributor

RetirementI write about retirement and wealth transfer planning.

GETTY

Any good wealth management plan involves the periodic evaluation of your financial goals and objectives—and a well-designed approach to help achieve them. Although often overlooked as a planning tool, life insurance can serve a broad spectrum of needs for individuals, families and business owners. Since there are a multitude of policies available, choosing the right life insurance policy and the amount of coverage is critical.

Before researching or purchasing a policy for yourself, it’s important to know what you want to accomplish with it—in other words, your near- and long-term goals. You’ll also want to consider the cost and if there’s a maximum premium you’re willing to pay for coverage or a set period over which you’d prefer to pay your premiums. Once you’ve identified your needs and constraints, you’ll be able to select the best policy for your unique circumstances and goals.

Term Life vs. Permanent

The first distinction is whether you want coverage for a specific length of time (term) or indefinite coverage that pays a benefit upon death (permanent). Term insurance is typically the cheapest short-term insurance option; however, if it’s not used before the term ends, your coverage expires or can become cost prohibitive. Typically, term insurance policies have a conversion feature that allows you to convert the policy from term to permanent without having to get recertified as insurable by the insurance provider.

Permanent life insurance, on the other hand, usually requires higher monthly premiums than term insurance, but pays a death benefit regardless of when you die. Additionally, permanent insurance can offer other benefits, including premium flexibility, cash values and tax-deferred investing. The primary types of permanent life insurance policies are universal life, no-lapse guaranteed universal life, indexed universal life, variable universal life and whole life.

Universal Life (UL)

UL policies are designed for maximum flexibility. As a policyholder, you can vary your premiums or reduce your death benefit as needed. These policies also offer a cash value, which is the excess of the premiums paid above the current cost of the insurance. The cash value balance earns an interest rate set by the insurer based on the yield of its general account, which is typically invested primarily in high-quality corporate bonds. As the balance accumulates, you can access a portion of your cash value or borrow against it without affecting your guaranteed death benefit.

No-Lapse Guaranteed Universal Life (GUL)

With a GUL policy, your death benefit is guaranteed provided you pay your premiums on time. These policies are typically less expensive than other permanent life insurance options, as premiums are calculated to maintain a level premium payment until death.

Indexed Universal Life (IUL)

IUL policies are identical to UL policies except the prevailing cash value interest rate is determined by a broad market index such as the S&P 500, subject to a minimum and maximum rate of return determined by the insurer. Since the cash value balance in these policies has the potential to earn a higher rate of return, premiums for IUL policies may be lower than traditional UL policies with the same death benefit. However, you also take on more risk since equity markets tend to be more volatile than high-quality bond investments. Moreover, the insurer can adjust the minimum and maximum rates of return at any time, which may be to your detriment.

Variable Universal Life (VUL)

The difference between VUL insurance policies and UL and IUL policies is that the cash value is invested directly in investments similar to mutual funds, which determine the rate of return earned on the balance. As the policyholder, you choose your own investments. However, you are also subject to the most performance risk with a VUL policy.

Whole Life (WL)

WL policies allow you to pay consistent premiums over the life of the policy and offer a guaranteed cash value accumulation. At the time of maturity, the cash value equals the policy’s death benefit. Like UL insurance, WL policies may allow you to borrow against your accumulated cash value during the life of the policy. The key differentiator is that WL policies typically do not offer the same flexibility that UL policies do regarding premium, cash value and death-benefit adjustments.

After you’ve settled on the best type of policy for your needs, determining how much coverage to purchase is an important question to review with your financial advisor. For example, if you’re the primary breadwinner seeking to provide for your young family in the event of your untimely death, it's important to project your family’s income needs and expenses over time. If you are purchasing life insurance to offset expected federal or state estate taxes, an estate tax analysis can help determine whether insurance is necessary and if so, how much is needed.

Because your life insurance needs can change over the course of your life, it’s important to check in regularly with your financial advisor to make sure you’re properly covered. Of course, it’s typically less expensive to purchase life insurance the younger and healthier you are, so the earlier you’re able to start planning, the better.

I am a managing director and senior wealth strategist in the Houston office of CIBC Private Wealth Management with over 35 years of industry experience. In this role, I am responsible for the development of integrated wealth management solutions and provide comprehensive est...

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Make most of your life insurance cover, add these Term insurance riders

Make most of your life insurance cover, add these Term insurance riders

December 1, 2018 11:17 AM

Under a term insurance policy, the policyholder also enjoys the prerogative of choosing different options along with the policy in order to get enhanced and overall protection.

When you plan to buy a life insurance policy, you must always consider buying a term insurance plan.

When you plan to buy a life insurance policy, you must always consider buying a term insurance plan. This is no doubt one of the simplest and most cost-effective insurance products available in the market today. Term insurance plans are designed and customized in such a manner that in the event of the sudden death of the policyholder, the beneficiaries receive the sum assured as a lump sum or monthly income, whichever the dependents choose.

Under the term plan, the insured pays the premium to the insurer until the policy tenure against which the insurer provides insurance cover to the policyholder. Under a term insurance policy, the policyholder also enjoys the prerogative of choosing different options along with the policy in order to get enhanced and overall protection. These options are better known as riders.

What are Term Insurance Riders?

Based on specific needs and requirements of the policyholders, insurers give an option to policyholders of customizing their term insurance cover with add-ons, also known as ‘riders’. Riders are basically like accessories which can be attached to the main insurance cover to enhance its overall value and functionality. They are additional features that need to be purchased along with the basic policy. Riders in a term insurance are very important to customize the policy for enhancing the sphere of benefits.

As per your individual needs, you may choose the right rider for your term cover by paying an extra premium amount. A rider usually comes into play on an occurrence of the specific event for which the rider is purchased. As a policyholder, it is very important for you to choose the right rider with the term insurance to enjoy the required benefits.

1. Accidental Death Rider

Not all would know the fact that India continues to be the accident capital of the world with over 150,000 people being killed each year in just road accidents. The numbers are even higher than most developed auto markets across the globe including the US. However, roads are just another example as accidents often happen at construction sites, home, and many other potentially safer places as well. While a simple term insurance plan gives you a normal death benefit, an accidental death rider offers a supplementary sum assured if the policyholder passes away due to an accident. This rider is very important for people with high-risk jobs as it provides the dependents with extra financial help.

2. Waiver of Premium Rider

A very popular rider among the policyholders, the waiver of premium rider keeps the term insurance plan active even if the policyholder is not able to pay the premium due to some unavoidable circumstances. The rider mostly comes into action when the policyholder losses on the monthly income due to a certain unexpected event like partial or complete disability due to an accident. The rider can also be availed during a critical illness when the policyholder losses on the monthly income and fails to pay the premium amount. During such an event, the rider takes the financial burden off the shoulder of the insured by waiving the premium till the term plan tenure.

3. Critical Illness Rider

Some major critical illnesses like cancer, heart attack, kidney failure, coronary artery bypass, and paralysis are some of the diseases that can surely dry out a person’s finances if there is no adequate cover in place. For all such situations, it is best to have a term plan with a critical illness benefit as a rider. It is a rider that helps to cover the cost of critical illness during both, hospitalization and non-hospitalisation expenses. Critical Illness rider provides much-required cash flow during the recovery period as well. On diagnoses of the illness, the rider provides the policyholder with a lump sum benefit. If unfortunately, the policyholder dies during the critical illness, the term insurance plan benefit is paid to the nominees.

4. Income Benefit Rider

In case of sudden death of the sole breadwinner of the family, it becomes very difficult for the dependents to replace the income. With the help of income benefit rider in a term insurance plan, the family receives a regular income for a fixed number of years. The income benefit rider is an addition to the existing life insurance policy as it provides the beneficiaries with an amount equal to the policyholder’s monthly income. The dependents get additional income for approximately 5-10 years along with the total sum assured. The rider is best suited for salaried people who are also the sole breadwinners of the family.

(By Santosh Agarwal, Head-Life Insurance, Policybazaar.com)

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