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Term life insurance plans are the most simple and easy to understand product for someone who wants ‘non-frills’ life insurance. In the last few years, the demand for term insurance plans has picked up and it’s likely to increase more due to the lower penetration of life insurance in India.
The basic concept of term life insurance remains the same across the industry. In very simple terms, it’s a life insurance policy, wherein policyholders pay premiums till the period of the policy. If the policyholder survives, he doesn’t get anything. But in case of their unfortunate demise, the family of the policyholders gets the sum assured.
Indian life insurance companies have bought novelties like add-on covers and returns of premium plans. But here in this article, we would like to explain what policyholders can expect from the term life insurance plans.
Covers life for fraction of premiums
Even though we are firm believers that policyholders need various traditional life insurance policies like money-back, unit link insurance plans (Ulips) and endowment policy for their various stages of life. Term plan can play an important role if bought at the start of the career or when someone is young. This will make sure that they get higher life cover (sum assured) with lower premiums.
Protects family in case of death of policyholder
One of the biggest advantages of the term life insurance is that in case of the death of the policyholders, the nominee or the family members gets the entire sum assured. Imagine, someone in his 40s passed away and he had a decent sum assured. The proceeds can be used for children’s education and marriage, repay any loans and can even be protected against inflation if invested in a proper way.
Flexibility of the premium’s payments
There are multiple ways in which policyholders can pay the premiums. It can be monthly, quarterly or even yearly. There are many policies where policyholders can continue to get cover for extended periods but premium is paid until they earn. To give an example, if someone who is 30 years old buys a policy of 50 years—he has an option to pay the premiums till the age of 60 (premium paying term for 30 years). He can continue to get his coverage till 80 years. So policyholders while buying a term plan can expect multiple payment options.
While we plan to protect ourselves from any unfortunate event in our life by buying a term life insurance policy. But there are many people who buy term life insurance for estate planning. Suppose someone who is in his 50s and is quite wealthy. He can buy term life insurance for higher sum assured (Rs 10 crore to 50 crore) upto 100 years coverage. If he passes away before 100 years his nominee or family members can get a huge chunk of money which can be used effectively for more wealth creation.
Can increase the cover over the period of time
There is a myth that once someone takes a term plan, they can buy extra cover for themselves in future. One can understand that when someone who is young buys a term plan, it might be for a lesser sum assured. But whenever the policyholders start earning more they can increase the life cover either from the same insurance company or withs some other one. However, they need to also understand that premiums will change between the first policy and second policy as price fluctuates and age increases.
If riders are part of the policy
Policyholders can expect insurance companies to give the pay out under some circumstances if the riders were part of the policy. If the policyholder has taken accidental death benefit cover and if he dies due to some accident, he can get an additional amount as said by the insurance companies. If someone has taken a waiver of premium rider or if they are unable to pay the future premiums due to the income loss or disability the future premiums are waived off by the insurers. There are multiple riders offered by the insurance companies and policyholders can expect them to compensate with the same.
Seamless claim settlement process
In a situation when the main earning member of the family is not there, the claim process should be simple. The nominee of the deceased members should give the required documents to the insurance companies within 90 days of the death of the policyholders. Once insurers scrutinize the documents, the payment is made by the insurance companies in a seamless manner. The nominees can expect the money to be given by the insurers in a quick manner if all the documents are in place.
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