Despite term insurance being the most affordable form of life insurance, many questions arise in the minds of the buyers about its features and benefits. Prior to buying, it is essential to understand the various aspects of term insurance and have a clear understanding of them. Here are a few of the frequently asked questions, answered.
Q: What Is Term Insurance? Why Do We Need It?
Well, term insurance, just like other forms of insurance, is a contract between the insurance company and a buyer. As per this contract, the insurance company collects regular premiums from the policy buyer. In case the policyholder passes away within the policy period, the family of the policyholder receives a pre-determined amount of money.
A term plan is a necessity for you if you have dependents and are the sole breadwinner of the family. It can also come in useful if you have liabilities like a home loan, a car loan or other debts. Term plans act as a safety net for your family and ensure that they remain financially independent and continue to live the lifestyle you provided for them, even when no longer there.
In fact, some term insurance plans offer monthly payouts (for a certain number of years), along with the lump sum amount (sum assured) that can provide a regular income. For example, Max Life Insurance offers Online Term Plan Plus with two unique propositions
1. Get one-time lump sum payout as life cover, plus a fixed monthly income for a certain period
2. Get one-time lump sum payout as life cover, plus an increasing monthly income for a certain period
Q: How Do You Know How Much Term Insurance To Buy?
Well, a simple thumb rule says that you need to have a life cover of at least 10 times your annual income. However, the fact is that your cover needs to be large enough to account for your current and future liabilities and your financial goals. So, if you have taken a home loan of Rs. 50 lakhs, ideally you should ensure that your life cover is large enough to at least cover the liability. Don’t forget to take inflation into account as well while calculating for future goals.
The best part of a term plan, as pointed out earlier is that you can avail a high life cover at a low premium. A 28-year old non-smoker male can avail Max Life’s Online Term Plan Plus offering a cover of Rs. 1 crore for little under Rs. 900 per month. The tenure of the policy is 30 years. You can also enhance the cover and benefits of a term insurance plan by opting for riders.
Q: What Are Riders?
Riders are optional added benefits you can top-up your term insurance with Accident Cover and the Waiver of Premium are the most popular riders, on payment of additional premium. The accidental death cover rider provides an additional cover, in case of death/ disability due to an accident, while the waiver of premium rider waives off the premium, in case of a genuine inability to work and earn in case of disability or critical illness.
Q: How Do You Decide On The Tenure Of The Policy?
Now, that would also depend on how early you purchase your term insurance policy. The earlier you buy one, the longer you can be covered. The thumb rule is to buy a policy for the maximum tenure possible, and drop it when it is no longer required. This is particularly useful if your policy is meant to square off a loan in your absence. You can tailor your policy according to the number of years you have left to pay your premiums. Additionally, it is prudent to ensure that you’re covered throughout your working life.
Q: What Are The Types Of Death Covered In Term Insurance?
Nearly all types of death are covered in term insurance, including natural death and death due to accidents or illness. However, there are exceptions. For example, death due to a natural disaster or an 'act of God' and death due to terrorist attacks might not be covered.
It is important to read the fine print of the policy document to know the details. You can also read online or consult an insurance agent to understand the terms and conditions of the policy.
Q: What If You Don't Die Within The Term Period?
At the end of the policy term, the insurance plan will terminate. The survival benefits, if any, are made available. Based on the provisions offered by the insurance company, you can also renew the policy to continue life protection.
So, research well and consider these questions while choosing a term plan and find the best one for you.
Disclaimer: Life Insurance coverage is available in this product. Max Life Online Term Plan Plus is a Non-Linked Non-Participating Individual Pure Risk Life Insurance Plan (UIN - 104N092V04). It provides only a death benefit and no maturity or surrender benefit. For more details on the risk factors, terms and conditions, please read the product sales prospectus carefully before concluding a sale.