What are benefits of Term Life Insurance?

Did you ever have a costly smartphone and break it in the first week? Did you also regret not paying extra for the insurance that the salesperson reminded you about, right before the purchase? 

Well, life is all about surprises. A phone can be repaired or better even, replaced. But, life is irreplaceable. If you’ve not taken insurance yet, to secure your future, this is a big bold reminder that you do. Term Life Insurance is that ‘guarantee’ that protects you and your family.

It is natural to be overwhelmed by fairly new terms such as policy, cover, premium, beneficiary, etc.

We’re here to help you cross that barrier. Learn about Term Life Insurance, and understand why it is important, and we’re sure you’ll by yourself make the right choice.

In this blog, we’ll elaborate on Term Life Insurance or Life Insurance, its benefits, tips on how to choose the best policy, and some FAQs about the same. 

The life insurance industry in India is expected to increase by 14-15% annually for the next three to five years. Now, that’s a green sign that this is the perfect time to get the insurance, that’s been unchecked on your To-Do list.

What is Term Insurance? 

Term insurance is a type of life insurance policy that provides coverage for a specified period of time, usually known as the “term”. It is a pure life cover with no savings or investment component. 

In simpler words, this policy is your “investment” for the financial stability of you and your family, in case there’s an emergency.

It is very normal for you to pay extra to get insurance for your car, at the time of purchase. This protects your car, and your pocket from a hefty payment in case there’s an accident.

Similarly, Term Insurance or Life Insurance protects your Life. They are designed to give your family financial protection, in case of an untimely death.

If the policyholder dies during the term of the policy, the death benefit is paid out to the nominee or beneficiary. The beneficiary in most cases is a family member like a spouse or children.

However, if the policyholder survives the term of the policy, there is no payout at maturity.

Term insurance policies are usually more affordable than other types of life insurance policies such as whole life insurance or endowment plans. 

The premium for term insurance policies is lower than other types of life insurance policies. This is because term insurance policies do not have any savings or investment component.

How Does Term Insurance Work? 

1. You purchase a term insurance policy from an insurance provider for a specific term, such as 10, 20, or 30 years.

2. You pay a premium (monthly, quarterly, annually, or as per the policy terms) to the insurance provider to keep the policy in force.

3. If you pass away during the term of the policy, the insurance company will pay a death benefit to your beneficiaries (the people to whom you have designated to receive the payout).

4. If you outlive the term of the policy, the coverage ends and the insurance company does not pay any benefits.

The primary purpose of term insurance is to provide financial protection for your loved ones in case something unexpected happens to you during the term of the policy. 

It is often more affordable than other types of life insurance policies, such as whole life insurance, because it does not build up cash value over time.

Term insurance policies do not have a maturity value because they are not designed to accumulate cash value over time. Instead, the policy provides coverage for a specific period of time, hence the word ‘term’.

However, if the policyholder outlives the term of the policy, the coverage ends and the policy expires. 

At that point, the insurance company does not pay any benefits or return any premiums paid during the term of the policy. The policyholder may choose to renew the policy, but the premiums will likely increase as the insured person gets older.

Also, there is no difference between term insurance and term life insurance. They both refer to the same insurance policy.

The terms “term insurance” and “term life insurance” are often used interchangeably in the insurance industry.

It’s worth noting that there are other types of life insurance policies, such as whole life insurance, universal life insurance, and variable life insurance. There is also medical insurance that caters to emergency medical expenses.

But, term life insurance policies are designed to provide coverage for the entire life of the insured person and often include a savings or investment component. 

However, term insurance is specifically designed to provide coverage for a limited period.

Benefits of Term Life Insurance

Affordability

Term life insurance policies are usually more affordable than other types of life insurance policies, such as whole life insurance. This is because they only provide coverage for a specific period and do not build cash value.

Flexibility

Term life insurance policies offer a great deal of flexibility. You can choose the length of the policy and the amount of coverage that you need. This allows you to customize the policy to fit your specific needs and budget.

Simple

Term life insurance policies are straightforward and easy to understand. There are no complicated investment components or cash values to worry about.

Peace of mind

Having a term life insurance policy can provide peace of mind knowing that your loved ones will be financially protected if something were to happen to you.

Estate planning

Term life insurance can be an important part of estate planning. It can help provide liquidity to pay estate taxes, debts, and other expenses that may arise after you pass away.

Term life insurance can provide an affordable and flexible way to protect your loved ones and provide peace of mind.

How to Choose Your Insurance Plan?

Choosing the best term insurance plan can be a daunting task, but here are some tips to help you select the right policy for your needs:

Determine your coverage needs

The first step in choosing a term insurance plan is to determine how much coverage you need. Consider your income, debts, future expenses, and your dependents’ needs to determine the appropriate coverage amount.

Compare policies

Once you know how much coverage you need, compare policies from different insurance providers. Look for policies that offer the coverage amount you need at a price you can afford.

Check the claim settlement ratio

The claim settlement ratio is the percentage of claims that an insurance company approves and pays out. Look for insurance providers with a high claim settlement ratio, as this indicates that they are more likely to pay out claims.

Consider the term length

Choose a term length that aligns with your needs. For example, if you have young children, you may want to choose a policy with a longer term length to ensure that they are financially protected until they are adults.

Look for additional benefits

Some term insurance policies offer additional benefits, such as accidental death coverage or critical illness coverage. Consider whether these benefits are important to you.

Check the premium payment options

Consider the premium payment options available with the policy. Some policies allow you to pay premiums monthly, quarterly, or annually, while others may require a lump sum payment.

Read the policy document carefully

Before purchasing a term insurance policy, read the policy document carefully to understand the terms and conditions of the policy. Make sure you understand the exclusions, limitations, and other important details of the policy.

By following these tips, you can choose a term insurance plan that provides the right coverage at an affordable price.

Commonly asked FAQs about Term Life Insurance

What is term life insurance? 

Term life insurance is a type of life insurance policy that provides coverage for a specific period, such as 10, 20, or 30 years. If the insured person dies during the term of the policy, the death benefit is paid out to the beneficiaries.

How much coverage do I need? 

The amount of coverage you need depends on your personal situation. You should consider factors such as your income, debts, and future expenses when determining how much coverage you need.

How long should my term life insurance policy be? 

The length of your policy depends on your personal situation. You should consider factors such as your age, the age of your dependents, and your financial goals when determining the length of your policy.

How much does term life insurance cost? 

The cost of term life insurance depends on several factors, including your age, health, and the amount of coverage you need. Term life insurance is more affordable than other types of life insurance policies.

Can I convert my term life insurance policy to a permanent policy? 

Many term life insurance policies offer the option to convert to a permanent policy at the end of the term. This allows you to continue your coverage without having to reapply for a new policy.

Do I need a medical exam to get term life insurance? 

In most cases, you will need to undergo a medical exam to get term life insurance. The results of the exam will be used to determine your health rating and the cost of your policy.

Can I cancel my term life insurance policy? 

Yes, you can cancel your term life insurance policy at any time. However, you will not receive a refund of any premiums that you have already paid.

In Summary

Term Life Insurance is like a financial safety net that you can put in place for a specific period of time.

Whether that’s while you’re paying off a mortgage, raising a family, or simply trying to get your finances in order.

One of the great things about term life insurance is that it can be customized to meet your individual needs. 

You can choose how much coverage you want, and how long you want it to last, and even add on extra features like disability riders or critical illness coverage. 

Plus, because it’s typically more affordable, you can get the protection you need without breaking the bank.

Now, it’s true that term life insurance policies don’t build up cash value like some other types of life insurance. But that doesn’t mean they’re any less valuable!

Re-stating the example, think of it like car insurance. You don’t expect to get a payout unless something bad happens, but having that coverage gives you peace of mind. And, it protects you financially in case of an accident.

Ultimately, the decision to get term life insurance is a personal choice that depends on your current life situation. Experts at Vittae can help you choose the best policy, personalized to your current financial situation. 

If you’re looking for a way to protect your loved ones and ensure their financial security in case the worst happens, term life insurance can be a great option to consider. 

Secure your future, with steps that you can take today.