Term insurance : Term life insurance is the simplest and purest form of life insurance that provides financial protection to the policyholder’s family for a specific time period at an affordable premium rate.
With a term insurance plan, you can get a comprehensive life cover at low quoted premium rates. If the insured dies during the policy term, an assured sum or death benefit is paid to the nominee.
Let us understand in detail what term insurance is and how it works:
The December 2019 annual report of the Insurance Regulatory Development Authority of India (IRDAI) reveals only 2.74% penetration of life insurance in India.
Indians remain underinsured due to limited awareness about life insurance benefits and how such schemes work. But if your loved ones’ livelihood depends on your income, you need to protect their financial security in your absence. And term life insurance is one of the best tools to ensure that your family never lacks financial resources.
So, you need to understand what is term insurance and how it works.
Term Insurance Meaning
A person investing in a term plan agrees to pay a premium fee to the insurance service provider. In return, the insurer promises a protective financial cover on the life of the insured person.
The insurance cover provided by a term insurance plan is valid only for the specified policy period. Depending on the age at which you invest in the scheme, the tenure can range from 10 years to 30 years or more.
What is Term Insurance
Term insurance is a pure security life insurance policy. It provides coverage for a defined period of time in exchange for a specified premium amount.
In case of any unfortunate event during this time frame, the insurer offers a guaranteed # payout. It compensates your nominee for the loss of your income.
Affordability is a distinguishing feature of a term plan. Such plans do not include any investment component. The full premium covers the mortality risk. Hence, term insurance offers great coverage at pocket-friendly rates. Thus, regardless of your budget, term insurance can cover the financial requirements of your dependents after an incident.
What is a Term Life Insurance Policy
Your policy is a contract between you and the insurance provider in which you pledge to pay the required premium and the insurer provides benefits in case of a valid life claim from your beneficiary.
Key Features of Term Insurance
After knowing the meaning of term insurance, it becomes easy to understand the features of term plans. Term plan is synonymous with protection – a simple life insurance plan with adequate cover to ensure the long-term security of your family’s financial condition and future. For policyholders, term insurance means an umbrella that covers their dear ones.
1.Broad coverage of term insurance plan
In term insurance, coverage means the scope of the plan. For instance, the best term plan coverage will result in:
- large life insurance sum
- Cover against accidental death and disability
- Cover for serious illnesses
- Longer policy term, i.e. coverage for a longer period of time
- affordable premium rates
2.Large life insurance sum
Term plans are complete protection plans, meaning these plans only work for covered events. Thus, the sum assured can be sufficient to take care of all the associated expenses for your family:
- Cost of Living
- running debts
- Cost of key goals
3.Cover against accidental death and disability
Since protection is the sole objective of a term plan, it makes sense for a term plan to include more contingencies. Accidental death and disablement is one such option available to you.
It is an important cover for the following reasons:
- Accidental death can result in additional final and legal costs for the family
- Disability may affect your earning potential
- You may need to modify your living accommodations to accommodate your disability
4.Cover for serious illness
Critical illnesses are life-threatening illnesses that can be fatal despite the best treatment. For instance, cancer, heart failure, etc. Critical Illness Cover will provide your family with the following:
- Protection for household expenses
- assistance with treatment costs
5.Longer Policy Period – Entry Age
You can buy a term insurance plan as soon as you reach the age of adulthood, i.e. 18 years. What’s more, you can have a policy that continues till 99.
Who should purchase a term insurance plan?
Read on to learn more about the goals you can set with your term insurance policy as you age.
Young and single
As a young and unmarried adult who is making his or her own living for the first time, it can be important to think about your responsibilities to yourself and your parents. Especially if your parents are nearing retirement and may not be very well prepared to take care of their health, you may be inclined to do what is best for them. At this stage of your life, your term plan is expected to ensure that your parents are taken care of in case anything happens to you.
Newly married people
Once you get married and move toward starting a new family, your priorities are likely to change. While you still want to ensure the well-being of your parents if something were to happen to you, your responsibilities will now expand to include your new spouse. When you start a new family, additional responsibilities may also come as you take out loans to purchase a new home or car.
Your term insurance policy can now be extended to ensure that your spouse is not burdened with a heavy debt if you are not around to help repay the loan. Additionally, you can help your spouse in getting term insurance at a reasonable rate.
You can opt for term plans available with some life insurance companies, through which you can add your spouse to the same policy at discounted premium rates. Since you can increase your coverage at various stages of your life, this policy is perfect for any stage of your life and can be the ideal insurance tool for you.
Who have small children
Children change the structure of any family from the moment their birth takes place. Parents start paying attention to their responsibilities towards the child and start dreaming about the future of the child. At this point in your life, you would want your term insurance plan to be more inclusive and comprehensive enough that it can help your child achieve their dreams in the long run.
Parents of children in high school
The cost of education is very high and continues to rise. Higher education is especially expensive and as a parent, it is natural that you would want to be prepared to spend a large amount of money to ensure that your child can study whatever they want and pursue their dreams with comfort. Can complete.
No parent wants their children’s dreams to be crushed due to lack of funds and with the ideal term insurance plan, you can ensure that your children are never compromising to reach their goals.
Those nearing retirement
Retirement is a time in your life for which you should start planning from the very beginning of your life. Ideally, when you start working, you should start setting aside funds that will come in handy when you retire. However, even if you haven’t, there is no cause for concern. If you have chosen a term plan that expands coverage with the changing stages of your life, all hope is not lost.
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