Term insurance plans are low-cost, high-cover plans to provide life protection.
A term insurance plan is different from all other types of life insurance policies. While in all other plans, a portion of the premium goes into savings, in a term insurance plan, the premium is entirely towards the risk coverage.
If you want to only buy protection, then a term insurance plan is the plan to buy from life insurance companies. The working is as simple as it may get – One pays a premium based on age, term and sum assured (life cover) and gets nothing on surviving the term. On death during the term, the nominee gets the sum assured.
The best part of term insurance is that the premium in them is low and even by paying a lower premium, you can get a high coverage. For example, someone age 35 can buy a term insurance plan of Rs 2 crore by paying approximately Rs 22,000 annually for 25 years. The actual premium will vary among insurers.
Effectively, one can buy a high cover of Rs 1 crore, Rs 2 crore or even Rs 5 crore by paying a fraction of the coverage amount as premium. Term insurance plans are low-cost, high-cover plans to provide life protection to family members.
In addition to providing life cover in purest form, there are several other add-ons and variants of term insurance plans. Depending on the need, one may add them to the basic cover and customize the policy.
According to Aatur Thakkar, Co- Founder and Director at Alliance Insurance Brokers, here are some of them:
Terminal Illness Cover: The full sum insured is paid to the life insured when s/he is diagnosed with an illness wherein s/he would not normally survive beyond the next 6 months
Waiver of Premium: In case the life insured to suffer a permanent total disability, all future premiums are waived, but the policy continues as per the original terms of the contract
Rider facilities: The product should be able to address the needs of essential riders that must be made available. For example, Accident Benefit plus Critical Illness Benefit plus Disability Benefit
And, when it comes to choice of the insurer, in addition to the low premium that the plan offers, also consider looking at other indicators. “For a comprehensive Term Life Insurance, one must look out for the backdrop of the underwriter – Solvency Margins, Claim Settlement Ratio, AUM and customer base, persistency ratings & rankings on the IRDA Dashboard,” informs Thakkar.