Term Life Insurance: All you need to know

Term Life Insurance: All you need to know
Term Life Insurance: All you need to know

Term Life Insurance: All you need to know

A term life insurance plan is a life insurance plan where in the insurer or the company offers a certain amount of money for a fixed period of time to the policyholder. The policyholder is required to pay a monthly/quarterly/yearly premium to the insurer. The plan works in the aftermath of the sudden demise of the policyholder.

Since the onset of the Covid 19, more and more people have realised the importance of buying a term life insurance policy. With so much grief and loss suffered by people across the country, it is important for everyone to understand how vital it is to own a term life insurance plan.

Post covid, medical treatments are skyrocketing. To pay for such exorbitant bills from your own pocket is next to impossible. No one wants to empty their savings. Therefore, many people have understood the significance of investing in multiple term plans.

If you are new to the world of insurance, and wondering why buy term insurance at all, then we have your back.

We have curated a step by step guide on the features of a term insurance plan, benefits of a term plan and everything you should know before you choose a term life insurance plan.

What are the features of term life insurance plan

Life is pretty unpredictable. We never know what disease we get inflicted with in the near future.

With our sedentary lifestyle and lack of exercise, more and more young people are becoming prone to diseases like cardiosvascular diseases, risk of diabetes, mental illness, cancer, Blood pressure. The list is long. But let us not take this in a negative way.

If you are sole breadwinner of your family, it becomes more important for you to get a term life insurance plan.

To help you make a good decision, we have listed down some key features about a term life insurance plan.

1. It should be affordable

The best thing about a term plan is its easy affordability. A pure term plan offers life cover for a specified amount known as the sum assured and for a specified tenure known as the policy term. In case the life insured dies during the policy term, the life insurance company pays the death benefit to the appointed nominee. There is no maturity benefit payable in case the life insured survives the policy term. The simplicity of the plan makes it an affordable proposition as the insurers have to pay death claim only.

2. Easy to Buy

Buying a term insurance is as easy as buying clothes and footwear.

It is a simple plan which requires you to decide the appropriate sum assured as per your financial objectives, standard of living, financial debts,etc. You can easily calculate the right sum assured amount using the online calculators.

There are 2 ways of buying a term insurance:

(i) Offline : buying a term plan through an agent.

(ii) Online: Online buying is buying directly from the insurance company in a digital space at your convenience with a few clicks and an internet connection. Online term plans are comparatively cheaper as it does not require any physical documentation hassles and is quickly processed.

3. Return of Premiums

People usually tend to be reluctant while buying a term plan because it does not offer any maturity value. However, there is term plan called term plan with return of premium. So it basically offers maturity value equivalent to the return of all paid premiums, if the insured survives the policy term.

4. Staggered Claims Pay out Option

All term plans offer lump sum benefit in the event of a death of the policyholder. Since the money goes to the family members, some of them find it hard to manage a huge lump sum claim amount/ So one can opt for staggered claims pay out option. Here partial Lump sum amount helps the family to combat the existing financial crisis due to the death of an earning member where as remaining amount payable as staggered payout in the form of monthly income will help the family to take care of their monthly financial expenses. The option to choose the staggered payout can be done by the life insured at the beginning of the policy.

5. Flexibility in Paying Premiums

Term insurance plan offers flexibility to pay premiums monthly/quarterly/yearly. There are term insurance plans that also offer single pay or limited pay premium option apart from regular pay premium. Such flexibilities allow the policyholder to choose the appropriate premium payment options according to their budget.

6. Offers Rebate

Life insurance companies offer rebate for opting a higher sum assured under term plans. For non smokers and women, the insurance companies offer special discounted premium rates as a gesture of commemorating them as a “standard life” with no adverse risk associated with them.

7. What are the types of term life insurance plan?

· Level Term plans: level term life insurance guarantees that you pay the same price for your policy no matter how long it’s active and your death benefit doesn’t change.

· TROP (Return on premium) plans: It is a type of term insurance plan but has one significant difference as compared to standard term plans. In standard term insurance, the policyholder does not receive anything in case he/she survives the policy tenure.

· Increasing Term Plans: an increasing term insurance plan is a term insurance plan wherein the sum assured chosen on plan commencement increases every year by a specified amount. ... However, the coverage allowed under the plan depends on the health of the insured at the time of buying the policy.

· Decreasing Term Plans: Decreasing term insurance is renewable term life insurance with coverage decreasing over the life of the policy at a predetermined rate. Premiums are usually constant throughout the contract, and reductions in coverage typically occur monthly or annually.

· Convertible term plans: A convertible term plan allows the policyholder to convert the plan into any other plan in the future. For example, if you want to switch from a term plan to endowment or a whole life insurance plan after 5 years of purchasing the policy, you are eligible to do so under convertible plans.

· Term plans with riders: Term insurance riders are amendments or attachments made to a term insurance plan, giving the policyholder additional coverage, thereby enhancing the policy’s utility. Riders provide several additional benefit apart from the death benefit offered by the term insurance policy.

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