Term Insurance - The Ultimate Financial Shield for Your Family

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There’s one quote that we have been hearing from our ancestors since time immemorial, and I’m sure most of us are bored of listening to it over and over again, and it says – “life is full of surprises!”  

However, there is one crucial element to this saying that is often not paid enough attention by most of us and that is – the surprises that life throws at you will not always be beautiful and desirable. Sometimes, they can turn out to be undesirable as well. For any such surprises that life may have planned to throw at you, if you are not prepared well in advance, it can cost you both your own happiness along with putting the lives of your dependents on the line.

If thinking about these undesirable surprises has turned your day into an unpleasant state of affairs, then I would like to apologize. The only intention behind stating the above is to safeguard your loved ones’ future via something like term insurance if there ever comes an unfortunate time when you are not with them. 

There are many people who consider various different investment instruments for saving money from shares to gold, real estate to mutual funds, among many more. However, there is one limitation that is common across all these avenues and that is that you have to regularly keep investing in them for the growth of your corpus.

These investment instruments are not bad avenues, however, none of them will help your family to meet their lifestyle needs if you are not around. A term plan is what will help you ensure that your family does not have to face any consequences if the breadwinner of the family is not around anymore.

All of us hold a basic idea of term plans – the dependents receive a fixed payout if you are not around anymore. However, there is more to term insurance plans than just this.

What is a Term Insurance Plan?

A term plan is a financial shield provided to your family in case anything unfortunate happens to you. If you are the sole earner of your family and there is no alternative source of income, then it is likely that they depend on you for the smallest needs. In such a situation, if something were to happen to you, their financial future will be at risk. Hence, to protect your loved ones from any such financial burden, there exists a term plan. under this, upon your untimely demise, your family will receive a pre-defined benefit which will help them sustain their lifestyle independently.

It is easy to announce “nothing can happen to me“ but none of us can ever be certain about this particular statement. There is always a “what if” that exists down the line. By opting for a term insurance cover you will help to plan ahead for your dependents for the “what if” probability of the situation.

Is a Term Cover Cost-Effective?

By this point in the journey, you must be sure about the importance of getting a term insurance plan. While this is all true, the cherry on the cake remains that term plans are extremely affordable. The premiums charged on the term covers are low as compared to the other life insurance plans in the market. The reason behind these budget-friendly premium charges is the non-attachment of any investment element.

It is important to know, that the earlier you get the term insurance, the cheaper will be the premium charges. This makes it extremely preferable to plan well in advance and opt for a term cover when you are young.

Does a Term Plan Offer Flexibility to the Policyholder?

The flexibility offered by term insurance plans is a major selling point. There are many term covers in the market that are convertible. This means that you can convert your term policy into an endowment plan for the same sum assured but at an increased premium.

The medical examination involved in a term policy is also flexible. It is not mandatory for you to go through these exams every time, even if your provider asks you to. You can put in a claim saying that you recently went through an examination and should not need another one this soon. If your provider agrees to this, you can get the medical waived off.

Another aspect of term insurance is that it is easier to opt-out of a term cover policy than a cash value policy, this is a policy that has some investment component attached to it. You can stop honoring the premium payments, and your policy will lapse thereby ending your coverage. This also means you will not get back any money.

Are Term Plans Easy to Understand?

When compared with the other plans available in the market, term insurance plans are very easy to wrap your head around and are also very straightforward. This is because there are only a few decisions that you need to make and there is nothing concealed.

However, there are some things you need to be certain about before you get the best term insurance plan for yourself.

  1. The premium you can afford to pay.
  2. The cover amount you think will be sufficient for your family’s lifestyle needs.
  3. The tenure for making your premium payments.
  4. The age you want to be covered until – ideally, you should take up coverage till your retirement age because usually by that point of time, you will have more members in the family that are earning an income, and which is why it is best to avoid high premium charges for extended coverage. It is best not to fall for the plans that offer a cover for longer years, such as till 100 years unless you really need them.

How is the Claim Rejection Rate of Term Insurance Plans?

Among the various other insurance policies out there in the market, the term insurance policies hold the lowest claim rejection rate. The reason behind this low percentage is that when an individual seeks to buy a term insurance policy, he or she is required to disclose every information regarding his or her health and lifestyle. If the individual fails to do so, he or she is at risk of not being approved for the term insurance plan. This ensures that there are no complications during claim settlement, which leads to a low claim rejection rate.

Can Additional Cover be Added To a Base Plan?

There are additional benefits offered to the policyholder in the form of riders. These add-ons can be taken up on top of the base term policy. There are a variety of riders available in the market such as accident benefit, waiver of premium, critical illness, etc.

For instance, with the waiver of premium rider, the policyholder is allowed to stop honoring the premium payments in case he or she suffers from a critical illness or dismemberment. The benefit of such an add-on is that the policy does not lapse even after the holder stops making the premium payments.

Which is the Right Term Cover Choice for Me?

When we talk about taking up term cover, there is no one size fits all policy. It depends on the buyer's needs and requirements. However, there are some major factors that can help you in answering this question. Some of them are:

Pay-out Flexibility

In some cases, it might not be the best decision for your dependents to receive a lump sum payout that’s huge in numbers. Some of the providers in the market have started offering plans with a flexible payout. For instance, you can opt for a policy that provides both, a lump sum upon the demise of the breadwinner along with a fixed monthly amount. It is good to ensure that the plan you choose offers this payout flexibility.

The Lowest Premium

When you decide to opt for a plan, you will be faced with numerous options. When you face this, it is important to remain cool and composed and not blindly fall for the policy with the lowest premium. You should thoroughly research the options and compare the benefits offered. Only opt for the plan that will be sufficient to sustain your dependents’ lifestyle needs.

Solvency Ratio

A solvency ratio indicates a company’s ability to pay the sum assured. You should pick an insurer with a high solvency ratio so that you are certain that even if there are a huge number of claims, your family will receive the payout.

Claim Settlement Ratio

This parameter cannot be taken lightly. You should always opt for the companies that hold a high claim settlement ratio. This will ensure that your loved ones are saved from the hassle in already stressful times.

Rider Benefits

The purpose of including riders in your plan is to make the maximum out of your policy. But you should only opt for riders that you are absolutely sure about. Adding all riders will increase your cost unnecessarily and some may even not be useful in the future.

The Final Say

Now that you are certain about this ultimate financial shield that will protect your loved ones in unfortunate situations, you can think about the amount of coverage that you need. Your age, liabilities and the sum assured your family will require are factors that will help in reaching a decision.

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