What is Term Insurance?
Term insurance is the most basic form of insurance that does not include any savings or profits component. Term insurance plan is comparatively inexpensive and affordable when compared to any other form of financial instrument.
Term insurance policy offers a financial protection against life’s uncertainties. Based on the term insurance plan you buy; your family will receive the sum assured within the policy period. The money received will help your loved ones to deal with financial hardships in your absence.
Reasons to Buy Term Insurance
The affordability of term plan is its most attractive feature. Because term insurance promises a guaranteed life cover in lieu of nominal premium payments.
Ease of buying the Term Plan
Term plan promise only death benefits. Buying term insurance plan is comparatively easier than any other kind of life insurance product or monetary instrument. There is no savings or investment component in term insurance. The entire amount of premium goes towards payment of mortality charges in addition to the administrative costs for policy issuance.
Varied payout options
Term Insurance promise lump-sum death benefits in a claim to the loved ones of their policyholders. However, ensuring a lump sum amount after death is not enough. You need to be sure that your nominee(s) or dependent(s) have the necessary financial acumen to deal with such a huge amount of sum assured. Keeping this in mind, policy holder can make declaration for lump sum or monthly payout to the nominee(s)
Premium paying flexibility
TIIAS offer their customers the flexibility to pay premiums to be it yearly, half-yearly, quarterly or monthly. And there are others too that require their customers to pay premiums only once during the policy period or allow the benefits of making limited premium payments. Premium paying flexibility allows the policyholders to choose the payment options based on their budgetary needs and convenience of paying towards the policy.
Unlike most financial instruments, where people have to determine the savings and investment components and the complexities that go into earning returns at the end of the investment term, term plans buyers do not have to worry about the market movements. Term insurance is associated with pure risk cover.
Higher life covers at low premiums
Compared to most investment options or monetary plans, a term plan is relatively inexpensive. The foremost benefit of buying any term plan insurance is that it is cheap
Assured death benefits
According to any term insurance proposal, the insurer promises to pay the nominee(s) of the policyholder a sum assured in the event of the latter’s death during the policy period. The amount of sum assured, also called death benefits, is predetermined while buying the policy. The nominee may be handed over the money in a lump sum or as monthly payments or a combination of both depending on the terms and conditions included in the policy.
Income Tax Benefits
Many people without realize the actual significance of buying term plan pay for them only to avail of tax benefits. Term life policies, in addition to keeping a family secure on a financial footing, ensure dual tax benefits too. The premiums paid at policy are deducted from the income earned under Section 80C of the Income Tax Act 1961.
Factors Considered before Buy:
Assess Your Financial Needs
Understand the financial needs and requirements of your family and yourself before you select a term insurance policy. The policy you choose must have an adequate life cover, large enough to take care of your family’s needs in your absence. Starting from analyzing all sources of income, number of dependents, existing financial liabilities, and the lifestyle expenses of family, you should consider the life goals of your spouse and children. This way, you will be able to select an adequate financial protection that will help your family live without worries, even in your absence.
Estimate Term Insurance Policy Premium
Once you have assessed your financial needs, the next step is to calculate term insurance premium that you need to pay for your term insurance policy. Contact TIIAS for best feasible solution to satisfy your needs. These include basic term insurance plans, term insurance with survival benefits (term plans with return of premium), and term insurance with various payout options.
The premium payable under a term insurance policy depends on several factors such as the chosen life cover, policy tenure, type of plan, age, gender and smoking habits.
Check the Insurer’s Claim Settlement Ratio (CSR)
Before you proceed to select a term insurance policy, it is crucial that you check the CSR of the insurance company you choose. CSR is the ratio of the number of claims received by the insurer versus claims settled by them during a financial year. A high CSR implies that the insurance company does its best to resolve the settlement claim filed by your nominee.
Q. Can I buy the term insurance plan for my spouse and children?
You may buy the best term insurance plans in India in your name to secure the financial future of your dependent(s). However, if you want the life of your spouse to be covered, you would have to procure a separate term insurance policy in his or her name. Simply said, one term policy can cover only one life at a time.
Q. Can I switch from one term insurance Company to the other considering that the other may include additional benefits not available in the former?
The answer is NO. Unlike health insurance policies that are renewable at the expiry of the policy period, thus, allowing you to opt for a different insurance company, policyholders cannot switch their term plans from one term insurance company to the other. However, if you are keen to avail a separate term insurance policy with a greater quantum of assured benefits, you may consider surrendering your current policy and pay for a new one.
Q. Will, my nominee(s) still receive the claim amount in case I die within one year of buying the term insurance policy?
Insurance companies do settle the claim in favour of the insured’s nominee(s) or dependents in case of death within a year of buying the term insurance plan. However, a lot depends on the terms and conditions of the insurer you had opted for. While buying term plan, it is important for the policyholder to read the terms and conditions published in the policy document thoroughly to prevent any scope of ambiguity later.
Q. How long does an insurance company take to settle a term insurance policy?
In most cases, the insurance company does not take more than 15 days to settle a term insurance policy. Though the claim settlement procedures may vary between insurance companies, in most cases it is a hassle-free process.