There is no end to uncertainties that can happen in life. If you want to ensure that your family remains financially secure in your absence, you need term insurance. Think of term insurance as a tool that prepares your family against financial burden. Before you move on to buy this type of life insurance plan, it is crucial that you understand what term insurance is.
What is Term Insurance?
Term insurance is a type of life insurance product that provides life cover to the insured for a certain time period. In case the insured dies during the chosen policy tenure, the beneficiary receives a death benefit as defined in the policy. Term insurance is the go-to product for individuals who want to ensure financial protection for their families. It is also the simplest form of life insurance – you pay a specific premium to the insurer and make the beneficiary entitled to receive a death benefit.
Also Read: Life Insurance FAQs
What are the Primary Features of Term Insurance?
Next to knowing the definition of term insurance, you should also understand the key features of a term insurance plan, some of which are given as follows:
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Life Coverage at Affordable Rates
While you do everything needed to take good care of your loved ones, you also have the responsibility to secure their lives against any financial setback. Particularly if you are the only earning member in the family, such financial planning is crucial and can be easily done with term insurance.
A term insurance plan enables you to plan for a worry-free future for your family in financial terms. It will prevent the family members from facing financial burden in case of your unfortunate demise. The best part is – you can choose a significant life cover at a relatively small term insurance premium.
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Critical Illness Coverage
No individual think of suffering from a critical illness unless the reality dawns upon him or her. When a health crisis occurs, it often leads to health deterioration and drains the hard-earned savings kept aside for various financial needs.
Although a pure term insurance plan offers death benefits only, you can extend its coverage with critical illness riders. These term insurance riders, when attached to a base policy, provides additional coverage for critical illness. As per the rider terms, you will receive a lumpsum amount when diagnosed with a critical illness specified in the list of illnesses covered.
Also Read: What is Critical Illness Insurance?
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Multiple Term Insurance Payouts
Another key feature of term insurance is choosing the payouts either as lumpsum or monthly income. These choices become helpful when you know about the money-handling capacity of your family members. Many people find it hard to handle a big sum of money they will receive as term insurance benefits. For them, a monthly income payout is a better choice than a lumpsum alternative.
The availability of these term insurance payout options also depends on the insurer you select. So, make sure you ask for them upfront at the time of buying a term insurance plan.
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Multiple Premium Payment Options
Typically, when you buy a term insurance plan, you choose to pay a certain premium every month or year throughout the policy tenure. This is commonly known as regular pay option with term insurance. However, it is not the only way you can choose to pay term insurance premiums. Depending on the insurance company you choose, you can get a limited pay option as well.
With a limited pay option for term insurance premium payment, you choose a premium payment tenure less than the policy tenure. This way, you can finish the premium payment cycles for term insurance earlier while the plan continues to provide life cover as per the policy term.
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Flexibility to Choose Term Insurance Policy Period
With term insurance plans, you also get the benefit of selecting a policy tenure of your choice. This is quite important as individuals at different life stages opt for a policy period based on their needs, lifestyle, and preference. Typically, it is good for young individuals to choose term insurance policy period till an age post their retirement.
You should also know that the longer the policy period you choose, the lower your term insurance premium will be. You can get an estimate for the same using online term insurance premium calculators.
Who All Should Buy Term Insurance?
Ideally, every individual who handles the financial responsibilities of a family and has dependents should buy a term insurance policy. Since the minimum age to buy a term insurance plan is eighteen years, you can choose a term insurance policy as soon as you begin your career. You can select a suitable sum assured corresponding to a premium you can easily afford. Online term insurance premium calculators can make it easier for you to compare premiums of different plans.
Also Read: Types of Term Insurance Plans in India
3 Reasons You Should Buy a Term Insurance Plan
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Financial Security for Family
By buying a suitable term insurance plan, you can enjoy peace of mind knowing that your loved ones will have a backup for their financial future. You can plan for this aspect of their lives based on your income and financial needs.
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Flexibility for Term Insurance Purchase
When you decide to buy term insurance, you get the flexibility to buy a plan offline or online based on your preference. You should know that the premium for the same term insurance plan from an insurer will differ depending on the mode you choose.
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Lower Risk of Claim Rejection
When you disclose correct details of yourself, nominee, income, and others while buying term insurance, you reduce the risk of facing claim rejection. This ensures that your family will not face any hassle in getting the claim settled as defined in your term insurance policy.
You May Like to Know More About: All About Term Insurance Calculator
5 Things You Should Know Before Buying Term Insurance
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Selection of Adequate Life Cover
You should evaluate your age, requirements, lifestyle, and loan liabilities to zero in on a suitable sum assured under a term insurance policy.
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Critical Illness Coverage
Make sure you analyse your health condition to determine if you need critical illness cover with term insurance. This type of coverage is generally available in the form of riders.
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Available Term Insurance Plans
It is crucial to research about various term insurance policies available in the market and compare their benefits at the time of buying one.
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Insurer’s Claim Settlement Ratio
Claim settlement ratio indicates the total claims settled by an insurance company in a specific year. The higher this ratio, the more reliable is the insurer.
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Solvency Ratio
This ratio indicates how strong an insurance company is financially to settle the term insurance claims raised by the policyholders.
