What is Term Insurance and it’s Features – Kotak Life

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What is Term Insurance?

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What is Term Insurance?

You must be aware of life insurances and how they help save your taxes. But have you considered getting term insurance to secure the future of your family? If you don’t know what term

insurance plans are and the benefits of buying an insurance policy, then keep reading further:

Term Insurance Meaning

Term insurance is a policy which provides pure protection to your family in the event of your death. It is the most basic type of life insurance plan available in the market. You are able to avail of higher life coverage at an affordable premium. This enables you to protect your family financially in case of an untoward incident during the policy term. In case of an unfortunate event, your beneficiaries receive the benefits as per the policy document. Based on the type of term insurance plan you choose, you may pay a single premium or a certain amount at periodic intervals.

It is important to not only understand what is term plan but you must also consider some factors before you make your decision. You need to consider factors such as inflation, current lifestyle of your family members, and your outstanding liabilities, to determine the amount of coverage you require to ensure the financial security of your beneficiaries in case of your absence.

Why choose term insurance?

To answer the question “what is term insurance” in simple words, it is a pure life cover. These plans do not include any profits or savings component. It is a basic plan that makes life coverage more affordable when compared to traditional insurance policies. Here are three features that make term plans a good choice.

  • Higher coverage
  • Because the premium on a term plan is lower when compared to traditional policies, you are able to afford a higher coverage for the same premium amount. For example, if you are in your 30s, a term plan with policy duration of 30 years for a cover of INR 1 crore is easily affordable. However, the premium on a traditional plan for INR 1 crore would be very high and probably beyond your financial capabilities.

  • Additional riders
  • You may include additional riders to procure comprehensive life coverage. You may opt for a critical illness rider that pays a certain amount in case you are diagnosed with the covered diseases. This benefit is over and above the regular benefits payable to your beneficiaries in case of an untoward circumstance, during the policy term. Some of the other riders include the waiver of premium, disability coverage, and loss of employment. You must choose the riders as per your requirements because such benefits are available at an additional premium. It is recommended that you understand more about such riders while you understand term insurance meaning.

  • Unique features

Insurance companies are innovative and provide some very unique features with the term plans. An example is that insurers often offer a discount on the premium amount if you are a non-tobacco user. Moreover, you may not have to undergo a medical test when you choose to buy a term plan. Knowing what is term insurance and buying a policy was never easier than today. This is because most insurance companies offer detailed information on their websites and also allow you to buy the plan online.

Insurance is an important aspect of financial planning. It is an excellent way to financially protect your family against unfortunate events. Term plans are pure insurance policies that are affordable and simple. In case of an unforeseen incident during the policy term, the benefits are paid to your beneficiaries. In case of your survival, there are no maturity benefits.

Now that you understand what is term plan, buy one today and protect your loved ones in your absence.

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Types of Term Insurance Plan

1. Level Term Insurance Plan

In level term plan, the premiums to be paid for the entire policy term remains fixed. The premium and the sum assured agreed upon by you and the insurer will not change for the entire term.

2. Increasing Term Insurance Plan

In this type of term insurance plan, the death benefit or sum assured keeps increasing as the years go by. But the premium remains the same and doesn’t change. Certain policies also have a cap till which the sum assured will stop growing.

3. Decreasing Term Insurance Plan

In decreasing term plan, the sum assured keeps decreasing every year till the policy term ends. The premiums of this insurance policy are comparatively lower when compared to other plans.

4. Term Insurance Return of Premium(TROP)

If you buy a return of premium policy, you will get all of the premiums paid to the insurer by the end of the policy year. But this stands true only if you survive the policy term. So, in the event of your death, the sum assured would be given to your beneficiary but if you were to survive, then only the premiums would bereturned to you.

5. Convertible Term Plans

In convertible term plans, you can convert your term plan to a different life insurance policy in the future. The type of insurance policy would be of your choice including whole life insurance, endowment plan, etc.

6. Term Plans with Riders

Riders are additional benefits that you can add to your term plan for better coverage. The different types of riders that you can add are critical illness, waiver of premium, accidental death, permanent disability and many more. To avail the benefit of term plans with riders, you have to pay an extra premium to your insurer.

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- A Consumer Education Initiative series by Kotak Life


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