The uncertainty of life can be very unnerving. In this economy, when the basic necessities of life are becoming more and more expensive, it is important to plan for the unexpected just to be on the safe side. Life insurance policies are the ideal way to do so, but the expenses of different plans can drill a hole in your financial plans. That is why term insurance is becoming a popular choice these days.
What is term insurance?
Term insurance policies are affordable and flexible forms of life insurance. These plans are available for 10-100 years based on your choosing and you can avail of the different types of term insurance for very low rates of premium.
Term insurance policies come in different forms to serve different purposes:
- Increasing term insurance –
These policies increase the total sum assured every year. They are suitable choices to beat the rate of inflation in the future. - Decreasing term insurance –
These policies decrease the total sum assured annually. The difference is used to repay lenders and reduce your liabilities. - Level term insurance –
These are preset plans where all the parameters of the plan remain the same for the entire policy tenure. - Single premium term insurance –
You can purchase these policies with a single, lump-sum premium. They are suitable if you have an unstable income. - Term insurance with return of premium –
Normally, term insurance does not offer maturity benefits. However, these plans pay you back the premiums you invested if you survive the policy tenure
You can check the benefits of each type of term insurance and use a term insurance calculator to determine the right type of policy for you.
How to use a term insurance calculator for accurate coverage?
Term insurance calculators are online gadgets that insurers provide on their apps and websites so you can get an accurate idea of the investment required for the coverage with which to protect your loved ones. You will need to follow these steps when using the term insurance calculator for an accurate estimation
- In the first step, you will need to provide the following personal details so the term insurance calculator can determine suitable plans for you:
- Name
- Education qualification
- Occupation
- Annual income
- Age or date of birth
- Gender
- Area of residence or PIN Code
- Smoking habits
- Based on these details, the term insurance calculator will share different plans that are suitable for you. You can assess your preferences and choose the type of term insurance that you would like to purchase.
- After selecting the type of policy you desire, you will need to upload the necessary documents. These would include identification, medical reports, and other supporting paperwork.
- Once you upload the documents, the term insurance calculator will assess your financials and risk factors. It will then ask you to specify the following details:
- The sum assured, i.e. the total coverage for your beneficiaries.
- The policy tenure, i.e., for how long you want to insure your life.
- The premium duration, i.e., the total number of years during which you will make premium payments. This can be shorter than the policy tenure.
- Premium paying frequency, i.e., how often you would like to pay premiums. You can choose monthly, annual, or single premium options.
- The mode of payout, i.e., how you want your beneficiaries to receive the payout. You can choose lump sum death benefit or monthly installments to support your livelihood.
- After you enter the specifications of your plan as per your preferences, the term insurance calculator will derive a suitable premium rate.
The term insurance calculator uses the figures you set to estimate the premium. If the amount seems too low, you can increase the coverage of your policy. If the amount appears higher than your own estimation, you can adjust the various parameters in the term insurance calculator for an affordable plan.
What is the waiting period in term insurance?
Unlike most forms of life insurance policies, the waiting period in term insurance is practically null. Based on circumstances, the waiting period in term insurance is determined as follows:
- For accidental death and natural demise, there is no waiting period in term insurance.
- In case of death by suicide, the waiting period in term insurance is 12 months, i.e., 1 year.
Term insurance plans are available for 10-100 years. The shorter policy tenure is the reason why most circumstances of death do not require a waiting period in term insurance to avail of the death benefit. However, since suicide is a personal choice, in order to prevent fraudulent behaviour, there is a waiting time included
Please keep in mind that most life insurance policies do not consider death by suicide as a valid reason to claim death benefits. However, in certain circumstances, the addendum is included in a few term insurance plans.
