What Is Term Insurance?
Term insurance policy is the most basic form of life insurance. Under a term insurance policy, the nominee or beneficiary is paid death benefits by the insurer if the insured dies within the term of the policy. The policyholder pays annual premiums to keep the policy active. Term insurance does not offer survival benefits, it is a pure risk cover.
Is It Necessary To Buy Term Insurance Plan?
In the modern World, you are not sure of what is going to happen in the next minute. Just look at the bomb blasts in Sri Lanka? With so much uncertainty looming around, you must think of your dependants. What would your dependants do on an unexpected demise? How are they going to lead their lives? Who is going to pay your children’s tuition fees? Who is going to feed your family? Who is going to take care of your ailing parents? Who is going to pay home loan EMIs? Availing a right term insurance policy would take care of all this. Term insurance policy would pay out the sum assured to the nominee / beneficiary, if the insured dies within the term of the policy.
If you are the breadwinner of the family, then it is extremely important for you to avail a term insurance policy. Term insurance policy serves as a substitute for income on an untimely demise.
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SEE ALSO: Term Life Insurance - A Necessity Or A Fad?
Importance Of Term Insurance:
- Term Life plan death benefits can be used to repay unpaid loans.
- Your children can continue pursuing education while your family still resides in the house which you bought with the help of a home loan.
- A right term insurance policy would take care of living expenses, even when you are not around.
- You leave behind a legacy.
Benefits Of Term Insurance Policy
- Financial Protection: Term insurance offers financial protection to your loved ones. It takes care of their living expenses in your absence.
- Affordable Premiums: Premiums of term insurance policy don’t cost much. You get a high sum assured at low premiums.
- Flexible Payouts: You get proceeds of a term insurance policy as a lump sum or periodic payouts depending on your choice.
- Ease Of Availing: Most insurers have enabled the online procedure. This has made availing term policies easy and hassle free.
- Add-On Covers: You can avail riders or add-on cover with term insurance. Riders alone payout a considerable sum along with the original sum assured.
- Choice of Plans: There are a wide range of insurers to choose from. You can compare various insurers before arriving at a decision.
- Benefits Are Non-Taxable: Proceeds of the term insurance policy received by the nominee or beneficiary on death of the policyholder are tax exempt.
Different Types Of Term Insurance Plans Available In The Insurance Industry
- Pure Term Plan: Under this plan, the nominee or the beneficiary would receive death benefits if the policy holder dies within the term of the policy. There are no survival benefits under pure term plans. The nominee or beneficiary has an option of receiving proceeds of the policy, either as a lump sum or as periodic pay outs.
- Decreasing Sum Term Plan: Decreasing sum term plans are those term policies in which the sum assured reduces on renewal each year. This kind of term insurance policy is for liabilities which reduce with time. Premiums payable for decreasing sum term plan are much lower than the normal one.
- Increasing Sum Assured: Increasing sum assured term polices are the exact opposite of decreasing sum term plans. In this, the sum assured increases on renewal each year. This type of term policy is advisable for those who have availed home loans or other long tenure loans in their 40s.
- Return Of Premium: A return of premium term policy returns premiums paid towards the term insurance plan, if the insured happens to survive the term of the policy. If the policyholder dies within the term of the policy, then death benefits of the policy would be paid out to the nominee or beneficiary. These plans are more expensive than normal term plans.
- Convertible Plans: With convertible term insurance plans, you have the option of converting the policy into an endowment plan. Some of the convertible plans have in-built conversion option while some offer conversion as an add-on feature.
Term Insurance Add-ons To Protect You
The add-on covers or riders enhance the sum assured of a term policy. Below mentioned are the most popular add-on covers in term policies:
- Critical Illness Cover: It’s great that you have secured your dependants’ life by availing a term policy. But, what if you are diagnosed with a critical illness? How are you going to pay for the medical expenses on treating the critical illness? Availing critical illness cover allows you claim the medical expenses for the treatment of a critical illness.
- Accidental Death: Accidental death cover enhances the sum assured. On death in an accident, the accidental death cover alone would pay out a sizeable sum of money, in addition to the sum assured of the policy.
Buy Online Term Insurance Plan, Here's Why
Most insurers offer the online application procedure to avail term policies. Buying term policies online has the following benefits:
- Cost: While buying term plan online, you avoid charges payable as brokerage to the insurance agent. You can directly interact with the insurer and pick up the best suitable plan.
- Flexibility and Convenience: You can apply for term insurance anywhere, at your convenience. Availing term plans online is easy and hassle free. You can compare various insurers and policies, and choose the best one.
- No Mis-Selling: Insurance agents might mis-sell products for their own gains. You can avoid this by applying online.
SEE ALSO: Term Insurance: How to buy the right term insurance plan?
Eligibility Criteria For Availing Term Insurance Plans
Each insurer has certain requirements that individuals must meet in order to avail term insurance policy. Below mentioned are the general eligibility criteria for availing term insurance policy:
- The applicant must be at least 18 years old.
- The applicant must not be older than 60 years.
- Premiums must be paid as a single pay, monthly, quarterly, bi-annually, or annually.
Documents Required To Avail a Term Policy
You have to provide a valid ID proof to the insurer. Few of the accepted ID proofs are mentioned below:
- Valid Driving License (DL)
- Voter ID
- Valid Passport
- PAN Card
- Aadhaar Card
- Utility bills like telephone bill, electricity bill, water bill, LPG connection and so on
- Bank account statement
- Property or Municipal tax challan
- Ration Card
- Age proof
- Income proof
- Latest photograph
- Any other documents as mentioned by the insurer
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