Term Insurance Terms & Conditions You Should not Avoid!
Are you worried about the financial future of your family in your absence?
If you’re nodding your head in YES or if you are clueless about how to go with this, then let us help you.
Thankfully it is possible to protect everything starting from your assets to your life.
Yes, you heard it right. With life insurance, you can cover your life and keep the financial future of your family unaffected. In this regard, term insurance is the most basic form of life insurance which offers death benefit to the insured family in case of an untimely demise of the insured.
But before digging into details, let’s clear your doubts on the concept ‘Term Insurance’!
Decoding Term Insurance
As we already have said term insurance is the purest form of life insurance, where the insurance protection is offered to the family of the policyholder in case of an unexpected event. If the sudden death of the bread winner of the family leads to loss of income or an accidental disability leading to no source of income, the beneficiary can claim the policy to avail death or disability benefit. Let’s us tell you, some insurance providers offer disability cover along with the death benefit as well. Nevertheless, the policy benefits can be availed for an exchange of a premium, which needs to be paid annually.
The major factors that influence term insurance premium include individual’s health, age and life expectancy. Although buying a term insurance plan is not an investment from the perspective of returns but more like buying peace of mind and financial protection for your family and loved ones
Why Term Insurance?
When compared to other types of life insurance programs such as permanent life insurance, term insurance plans are less expensive; this is mainly because these plans have no real cash value; the only value is the guaranteed death benefit from the policy.
There are various types of term insurance plans available. Many policies offer level premiums for the duration of the policy i.e. the premium remains the same during the entire course of the policy, such term insurance policies are also called level term insurance.
So, to make the best out of your term insurance policy, it is highly recommended to know about the terms and conditions associated with the policy.
Terms and Conditions of Term Insurance
With every life insurance comes terms and conditions, whether it be an investment plan or a term insurance policy, it is essential for you to get an idea about them. Mostly it includes various causes of death that would be covered and causes that won’t in a particular term insurance policy. As discussed earlier, term insurance plans cover the insured only during the period of time when the policy is active, by any chance if the insured passes away due to the following reasons the nominees would receive the death benefit-
Death due to medical conditions
This category includes deaths that have occurred due to any medical condition/complications or due to any disease.
This category includes deaths that have occurred naturally.
Accident related deaths
Term insurance policies include accidental death benefit. An accidental death may be defined as involuntary, unexpected or sudden event caused by an external and visible force. Such an event of trauma where death occurs independently with 90 to 120 days (depends on the policy terms) will be considered as an accidental death. Some typical cases which are considered as events of accidental death are as follows-
- Death due to accident involving vehicles
- Death due to accident involving machinery at work
- Death due to fire-related injuries
- Death due to drowning in river
- Death due to natural calamities i.e. lightning, earthquake etc.
The following would be the causes of death which are not covered by the policy and eventually the nominee would not receive the sum assured (death benefit).
If the policyholder is found to be a victim of a homicide and after investigation the company finds out that the nominee is involved in the murder or is involved in any crime, then the claim will be rejected or will be put on hold until the charges are cleared.
If the assured commits suicide within the policy tenure, the policy will be void meaning that no claim would be payable. However, if the policyholder commits suicide after one year from the policy initiation date nominees would receive a benefit Equal to a certain percentage of the paid premium.
The bottom line
It is very important to read the policy fine print very carefully and understand each and every clause, especially the exclusion part. Reason is different insurance providers have different clauses. Moreover, you should be aware of a few life insurance terminology and definitions that would further help you in the buying process. An informed buying is what when you approach only after considering all the related factors and terms.