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Term insurance definition
Term life insurance or term assurance is life insurance that provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires, coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments or conditions. If the life insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is typically the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time.
Need for term insurance in India 2019
Young people in their 20s or 30s thing themselves to be invincible. The thought of falling prey to a life-threatening disease rarely crosses their minds. They think that nothing of that sort can happen to them and hence they don’t give a second thought to life insurance. But they cannot be more wrong.
According to the 2019 report published by the National Institute of Cancer Prevention and Research in India, around 2.5 million Indians are currently diagnosed with this disease. Over 7 lakh people are newly registered every year. Around 5,56,400 people die of cancer every year of which a considerable percentage are people in the age group 30-69 years.
What happens to the families of those people after their deaths? What if he was the sole earning member of that family and had a young wife and two kids to look after? Here comes the need to have a term insurance plan. A term insurance is basically a life insurance that provides coverage for a certain period of time or years. If the insurer dies over the policy tenure then a death benefit (or sum assured) is paid to the registered nominee. No payout is made if the insurer survives the tenure.
How is term insurance different from traditional life insurance plans?
Term insurance plan in India is a pure life cover. That means that there is no savings/ profits component. They are basic plans which make life insurance more affordable. It enables the policyholder to opt for a larger life cover by paying a lower premium as compared to traditional endowment plans.
Key features of term insurance in India
1. Larger life cover:
Term insurance plans provide the flexibility to opt for a larger life cover at a lower premium than usual LIC life insurance plans. A 1 crore term insurance plan from ICICI health insurance company for a 28-year old will cost around Rs. 10,000 per annum for a period of 30 years. Similar endowment plans may be out of bounds for most 28-year olds. A traditional LIC endowment plan with 5 lakhs cover typically costs around Rs.25,000 per annum for a 28-year old.
2. Riders:
The policyholder can attach riders to the term plan, thereby enhancing the utility of the policy. So by opting for a critical illness rider or a critical illness plan, for instance, he is entitled to receive the sum assured on being diagnosed with the critical illness. This is in addition to the death benefit of an equal amount on death over the term of the policy. There are other riders to choose from like – loss of employment cover, disability cover, waiver of premium cover, among others. The policyholder should select riders based on his specific needs to make the life cover more suitable and meaningful.
3. Enhanced cover:
Some insurance companies allow the policyholder to increase the cover amount during certain important stages of their lives. For example, the insurer may be allowed to increase his cover by 50% at the time of getting married or by 25% while becoming a parent.
Also Read: Health insurance 2018 | What, Why & How plus some more
4. Innovative features:
Insurance companies have been swift to innovate when it comes to term insurance. For instance, companies have been quick and proactive in cutting premium rates even offering extra discounts to certain categories like non-smokers, for instance. Buying term plans is now quite convenient thanks to the internet. It is possible for a healthy individual, as defined by the insurer, to buy a term plan over the internet without taking a medical test.
Why people delay taking term insurance?
Not a fun task
It is not very amusing to plan for one’s death. Searching for various term plans therefore is a very sombre task. It usually gets postponed to the near future when one has become old.
A term insurance plan is the best gift of love and affection that you can give to your family. It gives your loved ones to manage their finances on their own when you are not around. It needs to be looked at a necessity rather than as optional.
Isn’t my employer’s group policy sufficient?
Everyone thinks that the group Mediclaim policy given by their employer is enough to take care of all the expenses. When someone falls ill and is admitted, it will cover all the treatment and the hospitalization expenses. But what after that? How will your dependents manage their finances for the rest of their lives in your absence? You need a term insurance cover in India to provide a buffer to your loved ones when you are not around.
Term insurance does not give any returns
It is very important to note that insurance is not an investment product. It a shield to protect against the uncertainties of life should any such misfortunes happen. You should not look at it as money wasted away. It can be a life saver in times of trouble.
Conclusion
The best time to buy a term insurance is NOW. No matter if you are single or married, you should buy a term insurance in India while it is still affordable. You should remember that the longer you delay the purchase, the higher will be your premium. You can easily find out the cover that you need and the premium for it using a life insurance calculator. Always remember that term insurance is the best affectionate hug and shield that you can gift to your family.