Term Insurance – An Exclusive Guide
20th Dec, 2012
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Insurance as the name suggests provide assurance of payment of fixed sum of money in the event of unexpected loss against payment of some predictable sum of money called as premium. It is tool to hedge against the risk of contingency. Thus it transfers all the risk from the insured to the insurer or the insurance company for a certain fee. Hence, insurance policy allows individuals, businesses and other entities to protect themselves against potential losses and financial adversity in exchange of a reasonable premium.
Insurance is something that everyone will need at some point of their lives. This includes life insurance, motor insurance, health insurance, travel insurance, home insurance, etc. Here in this article, we highlight one of the simplest and cheapest forms of life insurance, known as Term Insurance.
Term insurance is the purest form of insurance. The policy will be in force for a particular term (say 30 years or up to the age of 75) and then comes to an end. During the time policy is in force, the insured pays a fixed premium to the insurance company at regular intervals. This is called premium, and if during this time if the insured dies, the insurance company pays a guaranteed amount of money, known as sum assured, to the family of the insured. In case the insured survives the period of insurance, the policy terminates and nothing is payable to the insured. All the premiums paid till date go to the insurance company. Hence term insurance products offer only risk cover without any returns or any maturity value. These policies are relatively much cheaper when compared to traditional insurance products and cater to the specific needs of an individual, i.e., to cover the risk of death. Term insurance is provided by almost all life insurers.
Why Term Insurance: When an individual starts earning, he is expected to earn till the time he retires and his family is dependent on his income. With his recurring income and his savings, he fulfills his various financial goals. However, life is uncertain and an unfortunate event such as death or permanent disability can cease his capacity to earn. Hence every individual is required to protect his family against any unfortunate attached to his life so that his family continues to enjoy the same standard of living even if he is not alive.
Term insurance allows individual to take huge sum assured with small premium. For example: a 30-year-old man who wants to get his life insured for Rs.1 crore has to shell out only Rs.7,000 to Rs.8,000 every year to protect himself for next 30 years.
Ways to Buy Insurance: Nowadays, you can buy insurance in two ways – Online and Offline
Online: In this agreement, the insured ties up directly with the insurance company and no agent is involved in the process. The individual uploads all his data online and submits the same to the insurance company. The insurance company does the necessary medical check-ups, accepts/rejects the proposal and informs the insured through mail. The premium is usually cheaper when buying insurance online as the company saves on commission + other operating costs involved in issuing a policy offline. The only disadvantage is that this is a DIY (Do It Yourself) service and hence there is no assistance from an advisor.
Offline: Here, the individual interacts with a representative of the insurance company, which is usually an agent or advisor, and arrives at the right sum assured based on the agent’s advice. The advisor helps him fill the form and arrive at the correct premium amount as well. The client is also expected to get the after sales services like premium payment reminders, assistance in claim settlement, etc.
Conclusion: Term insurance provides a large death benefit for less premium. As a thumb rule, an individual should be insured for about 10 times his or her annual salary. One should buy term insurance at an early age (as and when one starts working) in order to get a higher sum assured at a lesser premium. The more you delay, the costlier will be the premium.
Provide an adequate amount of financial stability for your family! To learn more about our Term Insurance Plan click here !
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