A key to sound financial planning is to be prepared for the future – not only the immediate future but your family’s future after you’re no longer around.
Term life insurance can help secure your family’s future by providing them financial security for years to come – whether it is to manage their expenses or to fulfill their passion, life goals and dreams.
So, if you too have been wanting to buy term life insurance for a long time, but are not familiar with the concepts, here’s a guide that can help you.
How is a Term Life Insurance Different From Life Insurance?
The major difference between term life insurance and standard life insurance is that the former is an unreturnable investment, while the latter is not (excluding TROP).
That is to say, term life insurance provides only coverage in case of the demise of the policyholder within the term period. There are no added maturity returns, and no survival benefits like there are in a standard life insurance policy. At the same time, standard life insurance policies are a blend of both investment and insurance, as the insured can generate a corpus and get maturity benefits with it, while term life insurance is not.
Additionally, the premium prices of both types of insurance differ. While term life insurance premiums are on the lower end and much more affordable, standard life insurance premiums are relatively expensive.
Types of Term Life Insurance Policies
Standard Term Insurance
This is the basic term insurance policy that provides the death benefit. In a standard term insurance policy, the family gets the assured amount or the term coverage in an event of the demise of the policyholder during the term.
Group Term Insurance
A group term insurance plan is curated for societies, communities, companies and businesses wherein all the members are covered in a term life insurance policy. While the group term insurance policy does not come with added benefits that are different from a standard term insurance plan for an individual, it still provides a higher coverage as compared to the individual term policy.
Term Return of Premium (TROP)
The Term Return of Premium (TROP) is the only type of term life insurance policy that comes with survival benefits. If the policyholder survives the term, they get the total of the premium paid by them towards the term insurance policy. The only characteristic that makes it different from standard life insurance is that a term insurance policy doesn’t provide any added returns or other benefits upon maturity, just the premium money you paid it.
Convertible Term Plan
A Convertible Term Insurance Plan is like a basic term insurance plan that can be converted into a life insurance cover. This type of term insurance policy comes with a limited term period which can be renewed in the form of a life insurance policy without needing any medical proof.
The Benefits of Term Life Insurance
Term Life insurance might not bear the characteristics of standard life insurance policies, but it still comes with a lot of benefits such as affordability, death benefits, rider benefits and term insurance tax benefits.
Provides Financial Security
A term life insurance provides financial security to the family members of the deceased policyholder by paying them the coverage assured by the policy.
Highly Affordable Premiums With Higher Coverage
A term life insurance policy offers highly affordable premiums against a higher coverage as compared to a standard life insurance policy. Since, term life insurance premiums are highly affordable, anybody with a stable income can easily afford to have a term insurance policy to secure their family financially.
No Need for a Medical Test
While other life insurance policyholders need to take a compulsory medical test, a term life insurance policyholder is liberated from the obligation.
Additional Rider Benefits
Like other life insurance policies, a term life insurance policy also gives a choice to the policyholder to purchase add-ons to increase financial protection against accidents, and critical illnesses.
Provides a Supplementary Income in Case of Income Loss Due to Critical Illness or Injury
Policyholders can get a supplementary income if they are suffering from a critical illness or injury and are having a financial impact because of it.
The Exclusions You Should Know About Before We Wrap Up
While term life insurance provides a death benefit, it won’t be applicable if the death is a result of suicide, drugs, self-inflicted injuries, and AIDS.
That said, a term insurance policy is an ideal way to ensure financial protection for your family. However, careful selection is a prerequisite. It’s essential to know about your rights and duties as a policyholder before you proceed with the purchase of term life insurance.