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For all those who don’t know, let’s begin with the basics. What is Term Insurance?
Well, term insurance is a kind of insurance wherein you get coverage at a fixed rate of premium payments for a limited time. After the expiry of this period, the previous rate of premium is no longer guaranteed. This kind of insurance is considered to be the most economical and affordable insurance type that most people can choose from.
Limitations of Term Insurance
- The premium for term insurance increases sharply as the age advances. Thus, it becomes very difficult to meet the insurance needs at higher age economically.
- Most of the companies do not offer Term Insurance beyond the age of 65-70. Even if there are a few cases where Term Insurance is provided at that age, there are various strings attached to it.
- Term Insurance is not suitable for people who are envisioned to serve a purpose, if they wish to save money for a specific cause like marriage, divorce, the birth of a child, educational needs of a child, higher studies, or old age provisions like retirement needs, etc.
- Term Insurance does not provide you an income or looks after the capital needs of your family while you are alive.
- Under term policies, no loan is applicable.
- Wealth Creation isn’t possible through Term Insurance.
- Term Insurance does not provide you an edge over inflation, as they are without profit plans.
- If you are unwell for a prolonged period of time resulting in non-payment of the Term Insurance Premium, the policy gets terminated.
- It is not designed to last for a lifetime. In fact, most of the people who take term insurance end up outliving the coverage and drop it because of the costs involved.
- There are also limitations on the amount of coverage one can buy. Companies mainly have an upper cap to policy payouts.
- Although it is possible to convert a Term Insurance Policy to an endowment or whole life Policy, there are clauses attached to it.
Facts about Term Insurance
- Term Life Insurance brings forth coverage. This coverage is for a fixed tenure at a fixed premium rate.
- In case the insured person dies untimely during the policy term, the nominee of the Life Insured gets the total benefit/payout.
- The benefit can be paid out as a Lump Sum, or a Lump Sum and payment on a monthly basis or entire payment divided into monthly payments.
- Term Insurance Plans are said to be pure protection plans that ensure the financial stability of the dependents, in case there is an untimely death of the one who was insured.
- The premiums paid under Term Insurance are eligible for Tax deductions under the section 80C upto an amount of Rs. 1,50,000.
- Rider Benefits: Rider refers to the important additions to the basic plan offering. They provide an option to the Insurer to customize the coverage.
- Accidental Death Benefit: It insures an additional sum assured over the base offering in case of death occurring due to an accident.
- Accidental Disability: It insures an additional Lump Sum amount if a person gets physically disabled due to an accident.
- Critical Illness: It offers an additional sum assured over the based offering if the person who has taken a term insurance plan is diagnosed with one of the critical illness as per the rider.
- Waiver of Premium: It offers the insured, an opportunity to get a waiver from all policy premiums if diagnosed with the permanent disability or critical illness.
- Option to Increase Death Benefit: Term Insurance offers a wide range of plans. These include the plan where the life insured can increase the life covered at key stages like the birth of a child, critical illness, marriage, divorce, etc
Though a term insurance may have certain drawbacks, yet when you compare it with the advantages that it brings to the table – it is certainly worth everything. It is always recommended that you thoroughly compare the term insurance with other insurances and with that of other companies. You are aware that there are tons of financial institutions that provide various terms insurances. So, compare and do your research before you opt for an insurance.
“We cannot predict the future, but we can always prepare ourselves and our loved ones for all kinds of situations”! That’s what term insurance is all about.