What is Term Life Insurance?
Term life insurance or term assurance is life insurance that provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires, coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments or conditions. If the life insured dies during the term, the death benefit will be paid to the beneficiary/nominee. Term insurance is typically the least expensive way to purchase a substantial death benefit on a coverage amount per premium rupee basis over a specific period of time.
- Terms plans are pure Protection plans which ensures financial stability to the insured’s family in case of his/her untimely demise or disability
- Normally this amount is settled in a lupsum to the insured’s nominee in case of his/her death
- Term Life is purchased for a fixed duration and the premium rates are standard during the premium paying period
- Some of the benefits of Term Life include:
- Death Benefit: In the unfortunate event of death of life insured during policy term
- Rider Benefits: Riders are one of the critical options available to the insured at the time of purchasing his/her policy…some of the riders include:
- Accidental Death Benefit rider offers an additional sum assured in case of insured’s unfortunate death due to an accident.
- Accidental Disability rider
- Critical Illness rider offers an additional sum assured if the life insured is diagnosed with one of the critical illnesses covered under the policy
- Waiver of Premium rider offers the waiver of all policy premiums in case the life insured is diagnosed with a disability or critical illness or dies.
Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a the insured’s nominee a sum of money in exchange for a premium, upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policy holder typically pays a premium, either regularly or as one lump sum. Other expenses, such as funeral expenses, can also be included in the benefits.
Though one cannot exactly value a human life, an approximate sum could be determined based on the loss of income in future years, depending on the age of the insured, his occupation and his/her income. Hence, the Sum Assured ( or the amount guaranteed to be paid in the event of death of the insured) is by way of a ‘benefit’. Life Insurance products also pays the sum insured incase the policyholder becomes disabled on account of an accident.