Are you searching for short-term insurance plans to secure the future of your loved ones? Purchasing a term life insurance policy might be the answer you are looking for. Term life insurance offers financial protection to the nominee or dependents in case of the unfortunate demise of the insured. Contrary to life insurance policies, term life insurance plans require low premiums and often offer additional benefits.
Read on to know the benefits of term life insurance, its features, documents required to buy term life insurance plans and the payout options you can avail.
A term life insurance is a policy that provides insurance coverage to an individual for a particular term or period. It benefits the nominee financially only if the policy-holder expires during the policy’s specified term.
People with other family members dependent on them should consider buying term life insurance policies. Here is a list of individuals who might find term life insurance policies suitable.
Also Read: What Is General Insurance: Benefits, Types, List Of Companies And How To Claim
Here are some of the features of term life insurance policies:
The primary benefits of a term life insurance policy are enumerated below:
There are 5 types of term life insurance policies, as detailed below:
1. Increasing term insurance: In an increasing term life insurance, the sum assured increases periodically during the entire tenure of the policy. On the other hand, the premium amount remains the same. However, certain insurance providers have a maximum limit, and the assured sum cannot exceed that amount.
The coverage amount will cease to increase after attaining the limit, but the insurance policy will remain effective. This can make an increasing term life insurance plan expensive for some.
2. Decreasing term insurance: Sum assured payable decreases periodically over the entire tenure of decreasing term insurance. However, the payable premium amount remains the same.
Generally, the sum assured reduces to zero when the policy ends. These policies are used to provide protection against specific debts. A decreasing term insurance policy charges a low premium when compared to other term insurance policies.
3. Level-term insurance: The payable premiums and sum assured remain fixed for the entire policy tenure. Level-term life insurance is India’s most prevalent life insurance policy.
4. Term Insurance with the return of premium: In this plan, the insurer will have to return the premiums to the insured after maturity. However, this will be applicable only if the policy-holder survives the entire policy period.
5. Single premium term plan: Here, one can pay the premium for the entire tenure as a lump sum. Premium amounts are generally higher for this plan.
Here’s when you should opt for a term life insurance policy:
The reasons why one should buy a term life insurance policy are enumerated below:
Suppose an individual is the sole earning member of the family. In that case, he/she should consider purchasing a term life insurance policy as it ensures the family’s financial security in his/her absence.
Often, employers term life insurance policy as a welfare measure for their employees. It ensures the financial security of the employee’s family in case of any mishap. Furthermore, employers can also avail of tax benefits for paying the premium for term life insurance policies.
Insurance policies often demand huge payments from investors. This might leave businessmen short of cash for the growth and development of businesses. A term insurance policy is an affordable option that business owners can use.
This insurance policy is ideal for individuals who are on a tight budget and wish to avail the benefits of an insurance policy at an affordable cost.
Here is the list of documents that are generally required for term insurance policy applications:
Enumerated below are the eligibility criteria one must fulfil before applying for a term life insurance policy:
Given below are steps that one can follow to choose the best term life insurance policy:
Step 1: Assess your financial responsibilities and check the number of dependents you have.
Step 2: Check your income and the family’s economic requirements
Step 3: Analyse existing debts and liabilities.
Step 4: Compare the various types of term life insurance policies of various insurance companies. Find a policy that suits your financial requirements.
Step 4: Check the insurance provider’s claim settlement ratio.
Step 5: Finally, purchase the term insurance plan that is most suitable.
Term insurance cover calculation depends on the following factors:
Generally, experts recommend that term life insurance coverage should be 15 to 20 times the annual income of the insured.
Also Read: Understanding All About Sum Assured & Difference Between Sum Assured & Sum Insured
Here are the details of payout options associated with term life insurance policies:
One-time lump sum plus increasing monthly payouts: This category of payout offers a one-time payout after the insured person’s death. In addition, the nominee receives a monthly payout that increases yearly for a fixed tenure.
Given below are factors that one should consider before buying a term life insurance policy:
There are multiple term life insurance policies that one can choose from to secure their family’s future. Individuals are advised to take their age and financial requirements into account before choosing a suitable insurance policy. Get a term life insurance and secure your family’s future.
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Ans: A term life insurance policy provides the sum assured to the nominee after the untimely death of the policyholder. However, an accidental insurance policy provides financial benefits if the policyholder specifically dies in an accident.
Ans: Life insurance policies come with maturity benefits. But term insurance policies have no maturity benefits. If one purchases a term insurance plan, his/her nominees will receive the sum assured if the policy-holder passes away during the policy tenure.
Ans: This depends on the insurance provider and the type of term life insurance policy one avails. Some insurance companies may have the provision of returning the premium amount upon maturity. But this particular feature may demand payment of higher premium amounts.
Ans: Yes, an individual can invest in multiple term insurance policies. They can purchase these policies from either the same or different insurers. Experts advise people to opt for multiple term policies because it decreases the chances of claim rejection.
Ans: No, most term life insurance policies don’t cover deaths caused by natural disasters. Other exclusions include homicides, intoxication, HIV/AIDS and suicides.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.