Why Term Insurance Is Crucial to Have

Shockingly, the majority of Indians are either uninsured or under-insured. Apart from the rural population, even educated urban Indians do not have life insurance coverage. 

One of the important reasons for this lower penetration is the high premium levied on life policies. To combat this unaffordability, insurance companies offer pure life cover in the form of term insurance plans.

What is term insurance?

Before moving ahead, you need to understand what is term insurance. It is the most basic and economical form of life insurance coverage. In this plan, your nominees receive the monetary benefit in case of an unfortunate event occurring during the policy tenure. Such a policy does not offer any survival or maturity benefits, which allow you to procure a higher coverage at a nominal premium.

As a term policy provides a higher sum assured (SA) at a reasonable cost, you should not delay purchasing one. Here are five reasons why a term plan is crucial: 

• Financial stability

A term plan pays the SA to your beneficiaries in your absence during the policy duration. This ensures your family does not have to face financial constraints while dealing with the tragedy of you not being there for them. Additionally, they do not have to compromise on various financial goals, such as children’s education, due to a lack of liquidity.

• Reasonable 

A term policy eliminates the investment component, which is a part of other financial instruments. Therefore, the entire amount that you pay as premium is used towards providing life cover, which makes it a budget-friendly way to avail of higher coverage.

Several life insurance policies have a brokerage fee, which is mentioned under premium allocation. This fee recurs; it is applicable to every premium payment and reduces over a period. Often, this cost varies between 5% to 6% of the total premium. However, if you opt for an online policy, this cost is not applicable, making term insurance an inexpensive option.

• Versatile

You may choose an offline or an online term plan, which gives you immense flexibility. Moreover, you may customize the plan based on your family’s requirements. Insurers offer different types of term plans, such as level premium, return of premium, and decreased term plans. Therefore, such kind of life coverage is flexible, and you can rest assured to find a plan that best suits your needs and budget.

• Extra coverage with riders

Riders are benefits that you may include in your base policy at an additional premium. Some available options include critical illness cover, accidental death benefit, permanent or partial disability, and many more. However, remember that every additional rider increases the cost of the policy. Therefore, include only those riders that are necessary to avoid unwanted costs. 

• Low claim rejection

Irrespective of whether you buy an offline or online term plan, you need to provide authentic information. You must disclose all the relevant facts related to your health condition, financial situation, lifestyle, habits, and family history. This ensures your beneficiaries do not face any trouble while filing a claim in your sudden absence. As per the Insurance Regulatory and Development Authority of India (IRDAI), insurers cannot reject any claim stating non-disclosure of facts as the reason after the policy has been in effect for over two years.

The lack of knowledge and certain misconceptions about life cover is a major reason for the low insurance penetration in the country. Today, several portals and other online resources are available, which provide you with the necessary information to make an informed decision. So, research thoroughly and invest in a suitable term plan. 

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