Term insurance is the basic form of life insurance designed to give you a life cover for a fixed term period against an affordable premium. Accumulation of premium as savings or return is not the objective of the plan as much as that it only gives you a cover for various eventualities like untimely demise, an accident causing permanent full or partial disability or death and affliction with terminal illnesses. It is an option that the common person can access because of its inherent price advantage.
Meaning of Term Insurance:
In plain language, term life insurance plans offer life cover for a fixed term. The crucial feature is the word “term”, the period for which you are covered is specific. The event of unfortunate and untimely death during the currency of term of the policy, your nominee will be paid the death benefit, referred to as the “sum assured”, an amount that is pre-defined. This implies that if you survive the term of the policy, you are not entitled to receive any further payment from the insurer.
Sundry Term plans:
You must know the intricacies of term life cover and their variants to choose the best that suits your projections. The variants come with several implications, benefits, and frills that you may miss in the fine print if you do not analyze policy document and come to an informed decision.
Term Insurance Plan-Level:
This is the most elementary form of term plan where the sum assured or death benefit, where you pay unchanged premium through the contract period defining the term of the policy.
Term Insurance Plan-Increasing:
This term plan features incremental death benefit with every passing year. Thus, in this case, the premium is also incremental.
Term Insurance Plan-Decreasing:
The death benefit declines with each year in this kind of term insurance. Obviously then, in this case, the premium declines appropriately.
Return of Premium (TROP) Term Insurance:
The accumulated premiums are not lost in this class of term plan. If you survive the insurance term, the accumulated premiums paid by you during the tenure of the plan are restored to you. This ensures the return of your investment amounting to the total of premiums of the plan.
Term Insurance Plan-Convertible:
You may opt to switch the term plan to a permanent plan after the passage of a specific period in certain term plans. Medical reassessment is waived when you switch your plan. It is a real boon in cases where fresh term insurance may not be applicable due to your health status.
Term Insurance Plan-Renewable:
Renewable term insurance plans are endowed with auto-renewal facility without undergoing any medical evaluation after the end of the term insurance period. Needless to mention, this gives a lot of breathing space if you are ailing and taking another term insurance policy may not be possible under the circumstances.
Riders in Term plans:
Additional benefits appended to term insurance are called riders. Riders may provide extra cover for disablement permanently, incurable illness, death caused by accidents and similar such unforeseen eventualities. The different types of riders are:
Rider for Accidental Death:
Your nominee is paid a supplementary sum assured in case death is caused by accident. Other than accidental death, the initial sum assured only is paid out to your nominee.
Rider for Accelerated Death Benefit:
This rider assures advance payment of a part of your sum assured in case you are incurably ill. The heavy expenditure of your treatment and palliative care is lessened with the help of this rider.
Rider for Critical illness Benefit:
If your diagnosis confirms grave illnesses or are you undergoing treatment, you are paid an amount. The critical illnesses covered are paralysis, cancer, heart attack, kidney failure, stroke, liver transplant, by-pass surgery, any organ transplant, etc. to name a few. In this case as per the terms in the policy, the term insurance may either be continued or get terminated. Continuation in defined rules of the same policy, the sum assured will be reduced to the extent of the rider payout.
Rider Benefit for Accidental Disability:
The rider assures that you get regular payouts for a specific tenure of 5 to10 years if you are disabled or impaired permanently or partially due to an accident. This rider further stipulates that the impairment or disability the result of an accident. Usually, in any term insurance, the rider is in conjunction with the accidental death rider.
Rider for a Premium Waiver:
As an eventuality plan to keep the term insurance active if there is a default in premium payment, waiver of premium rider is ideally suited. The condition to ensure its applicability, the default should have arisen from income loss due to the incurrence of disability. You are not be required to pay the residual premium, and your sum assured will also be unbroken with this rider.
Ride Benefit for Income:
It ensures financial support supplementary to the sum assured, due to your family in your absence. It is in the form of regular monthly income to your nominee for a specific tenure of 5-10 years to stay as a financial crutch till your beneficiary is gainfully employed and is self-reliant.
Tenure of Term Insurance:
The determinant factor for the tenure of term insurance is influenced by certain conditions. To arrive at an ideal tenure of term cover, it is important to consider all future eventualities, predictable or not. The multiple factors that will help fix the period of term insurance are:
Your Age at Inception: Depending on your age, the term period is determined, which may range between 10 and 40 years with five years rests. It is a pro if you are young. Younger the age of entry, lower is the premium. From your perspective, starting young is thus the most gainful proposition.
Quantum of Sum Assured: The premiums ought to be higher if you choose a high sum assured. This automatically means that you may be compelled to select a short-term plan in case you can’t afford a high sum assured in consonance with your paying capacity. It is imperative that the sum assured be sensibly arrived at because it impacts the policy term directly.
Premium Sum: It is to your benefit to go for an affordable policy and try out riders for supplementary benefits. Lesser premiums ensure greater life to the term plan. Thus lesser premiums help you to opt for a term plan with a longer duration.
Lifestyle Habits: Bad lifestyle habit like smoking is an inhibiting factor for obtaining a superior term plan. Life-risk of smokers is obviously higher, for a single plan with like sum assured and term period, and you may be paying a higher premium. You have to, therefore, maintain a healthy routine. This will be handy for you to opt for a policy with a long-term period at a lesser premium.
Women-Centric Incentives: Women are believed to live longer. This boils down to the fact that the life-risk associated with women is much less as compared to men. Therefore the premiums determined for women is generally less. This allows them the flexibility to choose a lengthier term of insurance for the like assured sum as compared to the male counterpart.
Purchase a Plan Offline or Online: Purchasing an online term plan turns out to be cheaper as compared to an offline plan, primarily because the online system does not employ any agent in between. The saving on the commission is passed on to you in the form of a lower premium. In turn, based on the lower premium for the like sum assured you could choose a long duration term plan. Even for renewal, there can be many options to increase the period of an existing term insurance plan, subject to complying with other rules and regulations defined in the policy document. However, the duration of a term plan can be enhanced only in plans that have a clause to convert and renew.
Also Read: Aviva Life Insurance I-Term Smart Plan
Best Term Insurance Policy Online:
Identifying the best online term insurance policy requires you to consider those that give you the most advantages, ask fair premiums and have simple procedures for claim settlements. It is not difficult to find such an insurance company. Looking at various features enables you to find the one that suits you completely.
- Renewable Policies: It is the popular choice of online buyers because it allows you the flexibility regarding insurance rate and coverage. The in-built feature allows you the liberty to customize the plan to your specific needs.
- Dependency on Life insurance Companies: The mother, life insurance Company, is the major influencing factor in the quality of your choice of term insurance plan.
- Death Benefit: It is an extremely important consideration for you to choose the suitable term plan.
- Cover for Short-Term Requirements: The best plans are those that cover your immediate needs successfully.
- Comparisons: Comparison makes your choice easier and indeed, all the difference that is available, only when you go online.
When you decide to buy a term insurance plan, sifting through the fine print of the policy document is very important. The comparison becomes easier when you opt for online insurance plans. Knowledge of inclusions and exclusions helps you to avail of the best term plan in the market using online tools.