Term Life Insurance

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What is Term Life Insurance?

Term insurance is the simplest and most affordable form of life insurance.

Term plans provide peace of mind to you by ensuring that your family is financially secure and independent, in your absence. If you are the person insured, you pay a specific premium amount at fixed intervals during the policy term. In the event of your unfortunate demise during the policy term, your nominees will receive the ‘Sum Assured’ which you had selected while purchasing the plan.

Term insurance is a form of life insurance that is active for a fixed period of time (popularly referred to as the term). These plans are easy to understand and provide financial protection that your family will need if you are no longer around.

New age term plans provide additional protection through optional benefits like Critical Illness Cover and Accidental Death Cover.

Types of Term Life Insurance Plans

1. Level Term Plans or Standard term Plans:

This is the most basic, simple form of term insurance where the sum assured or death benefit is constant throughout the policy tenure, and benefits will be paid to the nominee on the death of the life insured.

2. Return of Premium Term Plans:

These type of Term plans come with maturity benefit wherein the total premium paid will be returned to the life insured if she/he survives the policy tenure.

3. Increasing Term Plans:

In these plans, the policyholder has the option to increase the sum assured on annual basis during the policy tenure, while maintaining the premium amount at the same value. Due to this reason, the premium for these plans is naturally on a bit higher side as compared to level term plans.

4. Decreasing Term Plans:

In this type of term plans, the sum assured keeps on decreasing every year in these plans to meet the decreasing insurance requirements of the life assured. This kind of plan is helpful to get the cover in cases where the policyholder has taken a home/personal loan and is paying an EMI (Equated Monthly Instalment) on the same.

5. Convertible Term Plans:

These plans come with an option wherein the policyholder can convert these plans into any other type of plan at a future date. For instance, a term insurance can be converted into an endowment plan, a whole life insurance plan, etc. after the specified number of years.

6. Term Plans with Riders:

This type of plan comes with rider options such as accidental death cover, critical illness cover, waiver of premium etc. which can be purchased along with the normal term plan by paying a small premium amount.

Reasons to Buy Term Life Insurance

Uncertainty is the second name of life. However, in our busy life, we always live in today and don’t think about uncertainties of tomorrow

One of the biggest uncertainties is the life itself. Nobody is sure about the continuity of life. However, the question “What if I die tomorrow” is never asked.

In case of sudden unfortunate incident like death, the family is faced with the following unpleasant questions:

How they will be able to maintain same lifestyle?
What happens to various liabilities like Car Loan, Home Loan and other EMI?
Whatwill happen to education of the kids?
What will happen to medical bills of the parents?
How will family bear the marriage expenses of kids?
How long will the savings last?

Term Insurance provides the answers to the above-mentioned questions.

Steps to follow While Buying Term Insurance

Determine the Requisite Term Insurance Coverage (Sum Assured)
Choose the Right Insurer
Disclose all the relevant Information
Take adequate Insurance Cover
Do not delay the decision

Determine the Requisite Term Insurance Coverage (Sum Assured)

The most critical step in buying term insurance is calculating the requisite amount of Sum Assured. A standard thumb rule as recommended by experts is to take a Coverage of atleast 10 times his gross annual income. However, while arriving at exact Sum Assured, one should also consider factors like lifestyle, needs of the dependents, age of the dependents and future increase in earnings. To determine the adequate coverage, kindly contact us as support@policyworld.com

Choose the Right Insurer

The next important step is to select the right insurance company based on:

Claim settlement Ratio: It is the ratio between the number of claims settled by an insurance company and the numbers of claims filed by the policyholders. It is always advisable to go for the insurer with the highest claim settlement ratio.
Solvency Ratio: It refers to an insurer’s ability to take care of its debts. A good solvency ratio indicates that the Insurance Company has a strong ability to meet its short-term and long-term liabilities.

Disclose all the relevant Information

While filling up the forms, it is very essential to declare all the relevant information correctly. Any misdeclration/hiding of information may lead to the rejection of the claims. The following information is very essential for the Insurance Company to decide whether to issue the policy:

Health Information including major operations/surgeries, health issues, pre-existing diseases etc.
Lifestyle Habits like Consumption of tobacco, alcohol etc.
Family History including history of health of parents and siblings and their death status and reasons thereof.
Income details including all the source of income.

Take adequate Insurance Cover

Average Sum Assured per person in India is approximately 1 lakh, which is very less. Insurance cover should be taken in such a manner that the surviving family continues to enjoy their current lifestyle upon unfortunate demise of the policy holder.

Do not delay the decision

Unfortunate event can happen at any time any place. With the increase in the age, there will increase in premium. Further, with the increasing age, there are chances of getting lifestyle diseases like diabetes etc. This can lead to higher premium or even rejection of the Insurance Proposal. Hence, it is advisable to take the Term Insurance at the earliest.