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Life insurer HDFC Life is offering its customers a unique life and critical illness (CI) rebalance option as part of its term insurance policy—HDFC Life Click 2 Protect Life. It is a non-linked, non-participating, individual term plan that can cater to the changing needs of individuals in the different stages of Life.

According to the insurer's statement, "The life and CI rebalance option provides protection against critical illness and death by auto-balancing Life and CI cover with increasing age. In this option, the life cover decreases while the critical illness cover increases proportionally on each policy anniversary. Further, on the diagnosis of any of the listed 36 CI conditions, not only the increased CI sum assured is paid but also all future premiums are waived off, and the life cover continues."

How policy works

At the start of the policy, the basic sum assured is split between life cover and critical illness cover in 80:20 ratio. The total basic sum assured remains the same throughout the policy.

Despite the increasing CI cover at every policy term, the premium for the customer remains unchanged throughout the policy term, the insurer's statement said.

On death, the applicable death benefit will be paid to the nominee. The option also allows one to get back all premiums paid on survival till maturity with return on premium add-on.

Let us understand it through an example. For an in-force policy, CI sum assured (SA) will increase every year at every policy anniversary, starting from the ­rest policy anniversary, and life cover SA will decrease by the same amount. This amount will be calculated as 30% x basic sum assured / policy term. However, Basic SA (life cover SA + CI SA) will remain the same throughout the policy term.

For instance, for Basic SA of 50 lakh and policy term of 10 years, benefit­ structure will vary over the term as follows:

Source: HDFC Life
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Source: HDFC Life

Once a CI claim is made, the life cover SA will be fi­xed at the then applicable level and the same SA will continue until the end of the policy term.

For instance, Mr X, who is 45 years old, buys the life and CI rebalance option of HDFC Life Click 2 Protect Life for a policy term of 20 years, regular pay, and avails a basic SA of 1 crore. He pays a premium of 64,700 annually.

Now, suppose he is diagnosed with a critical illness in the seventh policy year. In that case, his future premiums are waived, and he will receive 29 lakh as a lump sum of critical illness benefits. His life cover SA is now ­fixed at 71 lakh. What if Mr X passes away in the 13th policy year? In that case, his nominee will receive a lump sum death benefi­t of 71 lakh. Total premiums paid would be 452,900.

Srinivasan Parthasarathy, chief actuary–HDFC Life, said, "Rapidly changing lifestyles have brought about an increase in critical illnesses such as cancer, cardiac ailments, etc. The cost of treatment for such illnesses is usually very high and could even lead to a financial setback for the entire family. Thus it becomes imperative to have a policy that can cover the cost of treatment without having to dip into one's savings. The Life and CI Rebalance option available with Click 2 Protect Life enables policyholders and their families to be financially prepared to manage critical illnesses."

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