Term insurance is a type of life insurance policy. It provides coverage for a specified time period as per the requirement of the proposer. It provides financial protection to the nominee(s) in the event of the policyholder's death. In its simplistic form, once a term policy is issued, the policyholder pays regular premiums for the premium-paying term (PPT). In the case of a policyholder's death before the policy term (PT), the nominee receives the death benefit (Sum Assured) from the insurance company (Insurer). In case the policyholder survives the policy term (PT) there is no payout and the policy ends.
It is worth noting that term insurance is the cheapest form of life insurance as it does not have any investment component in its premium. Hence it is the most affordable way to provide financial protection to our loved ones.
Who should buy term insurance?
The simple answer is, anyone, having financial responsibilities and obligations may procure term insurance. Typically, Parents, Business owners, Breadwinners in the family, youngsters who have just started earning, and even housewives may purchase term insurance depending on their needs.
How much insurance should one buy?
Well, it really depends on the financial responsibilities and human life value (HLV) of an individual. One should consider financial liabilities (loans), regular household expenses, and unfinished goals of the family (education, marriage, etc) at the time of deciding on the sum insured (SA)
What are the various types of term insurance?
There are multiple types of term insurance. However, the most common types are Level Term Insurance and Increasing Term Insurance. In level-term insurance, both Sum Assured (SA) and premium remain constant throughout the premium paying term (PPT) while in increasing-term insurance the Sum Assured (SA) increases every year to keep up with the inflation but the premium remains constant throughout the premium paying term (PPT).
It is possible to choose various combinations of Premium paying terms (PPT) and Policy terms (PT) as per the client's requirements. One may choose to pay premiums throughout the policy term while others may choose to limit the premium paying term only to 5 years and get insurance coverage up to 85 years of age. The premiums in limited payment options are higher but overall outflow is lesser as compared to regular premiums.
It is always a good idea to consult your insurance advisor to find out the most suitable type of Life Insurance for your specific needs.
In a nutshell, Term Insurance is the most affordable and must-have type of insurance that provides financial protection to your loved ones!!
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