Ch. 1: What is Term Insurance? - Definition & Meaning

The last two years have been eye-opening. We’re now aware of how life can take a sudden turn, and our current lifestyles are helping further this scenario. Stress levels are high and habits like smoking, drinking, gadget addiction, etc worsen this.

The financial impact of losing the breadwinner of a family is replete with turmoil and can have serious financial consequences. There are recurring monthly expenses (including but not limited to school fees, grocery bills, fuel costs) that have to be taken care of, there might be loans to be paid off, or there might even be a sudden health expense.

This could mean that your family might have to give up on their dreams, lose their current lifestyle, and make long-term compromises because there’s a shortage of money. What if there was a simple, easy way to ensure this doesn’t happen?

Yes, we’re speaking about Term Insurance.

Let’s talk about what Insurance is first. Insurance is, broadly, a guarantee of compensation for any specified loss, damage, illness, or death in return for the payment of a specified premium. A premium is the amount of money you pay to the insurer for covering your risk. This is paid on an annual, quarterly, half-quarterly, or monthly basis depending on individual preference.

What is Term Insurance?

Term insurance is a straightforward and cost-effective life insurance policy that provides a predetermined sum assured to your family, if you pass away during the policy term. It also serves as a replacement for your income, safeguarding your family's dreams and lifestyle even after you are no longer there to provide for them.

Why Do You Need Term Insurance?

In today’s unpredictable world, term insurance is essential for various reasons. While no one anticipates the worst, it is wise to have a plan in place to ensure your family is financially stable in your absence. Term insurance provides that assurance by giving out a predetermined sum assured in case of your untimely passing.

A term insurance policy covers outstanding debts and helps prevent your loved ones from facing financial strain. This is why you should customise the coverage to match your family’s financial needs, including daily expenses and long-term goals. This thoughtful planning safeguards your family's future, enabling them to maintain their lifestyle and meet their financial obligations. Term insurance is cost-efficient, has low premiums and can also be paired with additional benefits like riders for comprehensive coverage. Ultimately, a term insurance plan is a fundamental pillar in providing both emotional and financial security for your family.

Why Is Term Insurance Better Than Other Options?

Term insurance is a top-notch choice for several reasons – it provides extensive coverage at affordable premiums and assures financial security for your family without draining your pockets. Unlike other life insurance options, term insurance concentrates solely on delivering a death benefit. This ensures that the plan is very straightforward and economical. You also have the option to tailor the coverage to suit your family's unique requirements, covering short-term needs, long-term goals, and outstanding debts. This simplicity and adaptability of term insurance, paired with additional riders for extra benefits, make it a smart option for safeguarding your family's future through effective financial planning.

Things To Know Before Buying A Term Insurance Plan

Before you decide on purchasing a term insurance plan, here are some crucial factors to consider

• You should start by evaluating your financial responsibilities, such as outstanding loans and your family's future requirements.
• Calculate the right coverage by assessing your debts, investments, dependents' living expenses, education, and long-term goals.
• Understand the policy duration and any flexibility it provides.
• Examine the claim settlement process and thoroughly read the policy terms, including exclusions.
• Opt for a reputable insurer with a proven track record for dependable financial protection. When you take these steps, you will be able to purchase an apt term insurance policy that is tailored to your specific needs and circumstances.

Key Features Of Term Insurance

Term Insurance offers many valuable features to suit your and your family’s financial needs

• Death Benefit: Term insurance ensures that your loved ones receive a substantial sum of money in the event of your untimely passing during the policy period.
• Affordability: You will be able to get significant coverage at budget-friendly premiums, making it a cost-effective choice.
• Flexible Policy Term: You also have the option to customise the duration of your policy to match your specific financial goals.
• Optional Riders: Term insurance provides the opportunity to enhance your protection by adding extra riders such as the accidental death benefit rider, critical illness rider, accidental disability rider, etc.
• Simplicity: As term insurance is a pure-risk cover that provides only a death benefit, it is easy to comprehend and manage, eliminating unnecessary complexities.
• Ease of Understanding: The simplicity of term insurance makes it accessible and uncomplicated for everyone.
• Financial Security: You can ensure the financial stability of your dependents and assure a safety net for your loved ones in times of need.
• Customizable Coverage: You have the option to tailor your policy to match individual requirements and financial obligations. This means that you can purchase a plan that aligns perfectly with your unique situation.
• Peace of Mind: It assures you that your family will be well-supported and thereby provides a sense of security during uncertain times.

Who Should Buy Term Insurance?

Term insurance is an essential tool if you have ongoing financial responsibilities. If you are the primary breadwinner in your family, term insurance guarantees* a predetermined sum to cover commitments such as your child's education, weddings, and the family's day-to-day expenses in the event of your absence. This security extends to financial dependents like spouses, parents, and children, so that they can continue their current lifestyle without any financial burden.

Also, if you have any loans, such as home or business loans, you will be able to shield your families from the repayment burden. If you are in the wealth-building phase, term insurance serves as a crucial safety net that promises continuous financial support until you accumulate substantial funds. This is why purchasing a term insurance policy is a responsible and caring choice to secure your family's future.

What Is Term Insurance Online Buying Procedure?

Buying term insurance online is a straightforward and user-friendly process

• First, visit our website and choose a suitable term insurance plan.
• Fill out the online application form with accurate personal and health details.
• Once you have selected the plan and premium, submit the required documents, like proof of identity, income proof, etc.
• Our team will review your application, and upon approval, you will receive the policy documents.

The online procedure guarantees a quick and trouble-free experience, making it easy for you to secure financial protection for your loved ones.

What Documents Will You Need To Buy Term Insurance Plans?

Here are the documents that you will require to purchase a term insurance plan

• Proof Of Identity: Provide Aadhaar card, passport, voter ID card, driving licence, or an authority letter.
• Proof Of Age: Submit PAN card, driving licence, birth certificate, or passport.
• Proof Of Address: Furnish documents like ration card, bank statement, utility bills, voter ID card, or passport.
• Proof Of Income: Provide income tax returns, salary slips, Form 16, or a certificate from your employer.

Please note that the documents required may vary depending on the insurance company.

How Much Life Cover Do I Need?

You can determine your life cover by assessing your investments, savings, loans, and your family's financial requirements, such as daily expenses, debts, and long-term goals. You should make it a point to include factors such as inflation and future expenses to assess an appropriate sum assured. This comprehensive approach ensures your policy sufficiently safeguards your loved ones financially in the unfortunate event of your passing.

Who Is Eligible For Term Insurance?

The eligibility criteria to qualify for a term insurance plan in India differs from one insurer to another. Generally, you need to be at least 18 years old, and the maximum age limit may vary (usually between 60 and 65 years). You should also keep in mind that educational and income prerequisites may vary among insurers as well. Insurers also assess factors like health, lifestyle, occupation, etc., to determine whether you are eligible for the policy or not.

Can I Buy Term Insurance For A Spouse?

Yes, you can purchase term insurance for your spouse. This thoughtful choice safeguards their financial well-being in the unfortunate event of their untimely passing. A term insurance policy offers a protective shield to provide for daily expenses, outstanding debts, and long-term dreams. This ensures your family's financial stability, even if you or your spouse are no longer able to provide support.

What Is a Term Insurance Rider?

A term insurance rider is an extra feature you can add to your base policy for added protection, and this includes the accidental death benefit rider, critical illness rider, waiver of premium rider, etc. These add-ons boost the overall coverage of your term insurance plan and provide extra financial support during specific situations. However, these riders come at an additional premium cost.

What Are The Factors That Affect The Term Insurance Premium?

Several factors determine the cost of term insurance premiums, and these include your age, health, lifestyle, chosen coverage amount, policy duration, etc. Typically, younger and healthier individuals enjoy lower premiums and lifestyle choices, like smoking, may elevate your premiums due to the heightened risk for the insurer. Also, your premiums are likely to increase if you opt for higher coverage or a longer policy term. Hence, you should consider all these factors when selecting a term insurance plan.

What Is The Minimum And The Maximum Age To Buy A Term Insurance Policy?

As discussed above, when looking to purchase a term insurance policy, keep in mind that the minimum age is usually 18 years. However, the maximum age eligibility varies between insurers, ranging from 60 to 65 years or even more. Hence, it is wise to check with your chosen insurer for specific age requirements tailored to their policies.

What Are The Exclusions Of Term Insurance Plans?

Term insurance plans typically exclude coverage for suicides within the first policy year of policy purchase. However, apart from this specific circumstance, there are no other causes of death excluded from term insurance. In the unfortunate event of suicide, the insurance company will provide a refund to your nominee of a percentage of the premium payments (excluding taxes) made in the first year.

To Conclude

Term insurance is a crucial tool in navigating the uncertainties of the world - it offers indispensable financial stability for your family. It helps address their immediate needs, long-term aspirations, and outstanding debts and secures their future at a budget-friendly cost. With simplicity, flexibility, and optional riders, term insurance stands out as the superior choice and promises substantial coverage without straining your finances