Term life insurance or term assurance is life insurance which 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 and/or conditions. If the insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis.
Term insurance functions in a manner similar to most other types of insurance in that it satisfies claims against what is insured if the premiums are up to date and the contract has not expired, and does not expect a return of Premium dollars if no claims are filed.
A term insurance policy is a pure risk cover for a specified period of time. What this means is that the sum assured is payable only if the policyholder dies within the policy term. For instance, if a person buys Rs 2 lakh policy for 15-years, his family is entitled to the money if he dies within that 15-year period.
What if he survives the 15-year period? Well, then he is not entitled to any payment; the insurance company keeps the entire premium paid during the 15-year period.
So, there is no element of savings or investment in such a policy. It is a 100 per cent risk cover. It simply means that a person pays a certain premium to protect his family against his sudden death. He forfeits the amount if he outlives the period of the policy. This explains why the Term Insurance Policy comes at the lowest cost.
Types of Term Life Insurance Policy
Single-premium term policies
you pay the premium once and for all
You can avail the cover till the specified term ends
ICICIPrulife, Omkotak Life, HDFC Standard Life Insurance and Birla Sunlife Life Insurance are some players offering this policy.
Regular-premium term plans
These are plain vanilla insurance policies.
You will have to pay the premium every year till the end of the insurance term.
Term policies with a return of premium
This policy operates in a similar vein to the term insurance policy with a psychological difference. Should you survive the term, you get all the premiums you paid. It could be with or without interest.
At least you know one thing: if you survive, no money is lost.
Loan cover term assurance
Sold by HDFC Standard Life, this policy is targeted at those who have taken home loans.
The insurance amount is equivalent to the outstanding loan amount. It progressively decreases, in the same proportion, as the loan amount is paid back.
The premium here works just like the Equated Monthly Installment of the home loan. The EMI is an unequal combination of interest payment and principal repayment. But it stays constant through the repayment period.
In case of your unfortunate demise or Critical Illness during the policy term, your nominee will receive the Sum Assured + any optional benefits due.
Since this non-participating (without profits) plan is a pure risk cover plan, no benefits are payable on survival of the insured life to the end of the term of the policy.
An ideal way to secure the financial future of your loved ones.
High cover at a very nominal cost plus an option of adding optional benefits to cover other eventualities.
Choice of premium payment options - regular premium or a single one-time premium.
Choice of taking the plan on a single life basis or a joint life (first claim) basis.
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