What, why, and how?

Dec 06, 2018 | 1 month ago | Read Time: 3 minutes | By iKnowledge Team

A term insurance policy is the most economical way of getting higher coverage for lesser premium.

Himanshu is exploring insurance options. He is 30 years old and employed with a reputed company. His research of traditional insurance plans leaves him feeling frustrated. The premiums for a high sum assured are astronomical and he can’t afford to spend his entire month’s salary as annual premium. He is confused with the different types of plans and doesn’t understand the concept of bonus on policies and other such terms. Feeling frustrated, he puts off investing in insurance.

Himanshu is not alone. Like him, navigating through different insurance policies to pick the right one is a complicated exercise. In a lot of traditional plans, the coverage is not sufficient to match with a family’s needs and for a higher sum assured, the premium costs increase. This is because traditional insurance plans invest the premium and give out benefits such as bonuses and other additions.

A term insurance policy is a perfect option for people looking to get a high sum assured without shelling out too much for premium.

Image source: Freepik

 

But what is term insurance?

Term insurance is a type of insurance where the premium amount is completely used to cover the life of the assured. This means 100% of the premium paid goes to cover risks. No part of the premium is diverted to investments.

Under a term policy, the sum assured is paid in the event of death. No other payments during the life of the policyholder are made. If the policyholder survives the duration of the policy, then no payment will be made. To simplify it, in traditional insurance policies, sum assured is paid on death or maturity. In term insurance, the sum assured is paid out only in the event of death of the assured. No sum is paid on maturity.

The reason term insurance policies are so cost effective is because they do not pay anything on maturity. The premium purely covers the risk of death during the policy term.

 

Why invest in term insurance?

The benefit of investing in term insurance is the high coverage. It is possible to get life cover for Rs. 2 crore for premiums as low as Rs. 20,000 a year. This makes it possible for people of different earning capabilities to buy term insurance.

Term insurance is cost effective. Most insurance companies cover up to 80 years and some even cover up to 100 years of age. These benefits are not available in traditional life insurance policies.

For example, Aegon Life’s iTerm policy provides coverage up to 100 years of age. Investing in such a policy makes it hassle-free for the policyholder. The iTerm plan includes riders such as accidental benefit coverage and critical illness coverage. This combination of life and health insurance provides double benefit in case of any medical emergencies. The iTerm Plus plan covers 36 critical illnesses and provides 25% of sum assured on diagnosis. These benefits make it one of the best plans to invest in.

The main purpose of purchasing life insurance is to secure your family’s future. Term insurance is an excellent way of providing for your family by taking maximum possible coverage. The coverage under term insurance can help financially secure your family for many years to come.

Another reason to buy term insurance is the duration of the policy. Traditional insurance policies offer coverage for 20 or 25 years.s Aegon Life offers iTerm plan that provides coverage up to the age of 100 years .

How to invest in term insurance?

The advantage of living in an online world is that insurance policies have now come online. It is very simple to buy term insurance in one click online, just like Aegon Life offers iTerm plan online.

It also offers premium calculator which helps to find out the premium for the particular insurance policy. Once you find the perfect online term plan, you can purchase it online.

Most insurers provide a 30-day period within which the policy can be cancelled without any charges. This way, you can invest in a term policy guilt free. If you find a better plan, you can switch within the 30 day period, or invest in it the next year. The flexibility that term insurance offers makes it an excellent investment. Have you got yours yet?

II/Oct 2018/4539


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