Term Insurance is the most basic form of life cover. Going by the simplest definition, it is a fixed-term contract between you and the insurance company, under which you pay regular premiums and the company agrees to pay your nomineeA person or firm into whose name the policy is transferred in order to facilitate transactions, while leaving the customer as the actual owner. a lump sum in case you are no longer there.
Getting a Term Insurance is an important step in your financial planning because in case of your demise, during the policy term, it will financially safeguard your family and help them maintain their lifestyle & take care of liabilities in the form of loans etc.
Term Plans can be extended to include disability & death due to accidents by opting for riders. A few term plan variants also come with the option of monthly income along with the lump sum payout, further helping your family with day-to-day expenses.
If you're not sure you might need a term insurance plan, thinking about these questions might help:
Are You the Sole Breadwinner of the Family?
If the answer is yes, you should consider buying a term insurance plan. This is because, if you are no longer there, your family's financial security could be seriously jeopardized. As the only earning member, all the current household expenses and your family's future goals are dependent on your ability to continue earning. In case of your untimely death, the income would stop, leading to an uncomfortable situation for your family.
You can opt for a term plan with monthly income option that pays a lump sum amount as well as monthly payouts for 10 years to your family so that they can mitigate the day-to-day expenses and continue to maintain the lifestyle that you provide.
Are You Looking for a High Cover at a Low Premium? Or do You Need to Increase Your Existing Life Cover?
If yes, a term insurance policy should be in your consideration set. It offers a high cover for a relatively smaller premium. For example, a 28-year old non-smoking male can get a life cover of Rs. Rs. 1 Crore with a 30 year term, for just Rs. 576/month*.
A cover like this can help you safeguard the interests of your dependents for just under Rs. 20 a day. In case of your untimely demise , your family will receive the Rs. 1 Crore lumpsum which will help ease the financial burden.
Are You Servicing a Loan or a Liability?
A term plan is a MUST if you are servicing a loan or any other liability. Imagine if you have availed a Rs. 50 Lakh home loan and something happens to you. How will your family continue to pay the EMIs? This is where a term plan with a Rs. 1 Crore life cover can help your family pay off the Rs. 50 Lakh liability and still maintain their lifestyle with the other Rs. 50 Lakh.
The “term” in a term insurance plan also lends flexibility. Continuing with the above case, if the tenure for the outstanding loan is 15 years, you can opt to discontinue the policy after the liability has been settled. However, you should ideally continue for a tenure that is at least equal to the no. of years left before retirement, to cover for your income.
Are You Looking for a Wider Safety Net?
Term insurance plans also allow you to add riders that provide additional protection in case of death due to accidents and further waiver of premiums in case of dismemberment/critical illnesses. For example, in the example discussed above, a Comprehensive Accident Benefit Rider can be availed at a small additional premium of Rs.2016 a year*. This rider offers an additional Sum of Rs. 32 Lakhs in case the life assuredpasses away in an accident.
It is never too late or early to get started with a Term Plan. You can begin your journey by getting a quick quote to understand what you would get and make a well-informed decision.
*(Exclusive of all taxes & cess as applicable)