What is a Term Life Insurance – Complete Details

What is a Term Life Insurance – Complete Details

What is Term Life Insurance this is what i am going to explain you in simple terms. Its oldest and cheapest form of insurance and has many benefits along with it.


Let’s start discussing from the basic then will start discussing on the term insurance.

What is a Life Insurance

Purpose of taking life insurance is to provide life cover to the policyholder and financial security to his family.

There are two ways in which a person can take life insurance
  • By opting for a pure life cover known as term insurance
  • By taking life cover along with saving component built in called as endowment insurance

term insurance benefits

What is Term Insurance

  • Term insurance is a type of life insurance in which it covers a certain period of your life.
  • If the insured dies the amount or death benefit will be given to the nominee.
  • If the insured remains till the policy term, no amount is given.
  • Th main purpose of term insurance is to provide the cover to your family on a very minimum premium(Fixed rate of payments)

what is term insurance and how does it work

 

Advantages of Term Insurance

  • Simplicity (Much easier to understand than endowment plans)
  • Competitive pricing(can be easily compared)
  • Flexibility
    • Opt out any time, just stop paying your premium
    • You can add accident cover, disability benefit etc. (depends on insurance company plan)
  • Tax Benefit
  • Lowest Premiums
    • Provides financial security at lowest cost for your family

 

term insurance vs life insurance
 

Limitations of Term Insurance

  • Premium of the insurance increases if you take the policy in higher age
  • You cannot take insurance after 65 or 70 depends on the company providing insurance
  • It will not serve your purpose of saving money or wealth creation not possible
  • No surrender benefit or loans are available under these policies
  • You cannot renew them if for any reason you become uninsurable

whole life insurance

 

Point to be noted before taking term insurance

  • How good is the insurance company
  • How much cover do you need
  • Check CSR(Claim settlement ratio)
  • Compare terms and conditions with various insurance companies
  • It’s advisable to take two term insurance from two different companies – separate polices if one claim is rejected we can have another
  • Do not miss the premiums(Some companies like LIC provides 30/15 Days grace period to deposit the premium other may not)
  • If you are smoker the premium will be more.
  • Consider inflation in mind
  • Consider Add-ons
 
benefits of term life insurance

Documents Required for Term Insurance

  • PAN card.
  • Proof of age (passport/birth certificate/driving licence/PAN card etc.)
  • Proof of address (utility bills/ration card/bank account statement/voter’s ID card/passport).
  • Proof of identity (passport/voter’s ID card/Aadhaar card/driving licence/letter from a public servant or authority verifying identity).
  • Proof of income (Income tax return/employer’s certificate/Income Tax assessment order).
  • Recent passport sized photographs.
 

Exclusions for Term Insurance Plans

  • Suicide
  • Death due to war, terrorism drought: Natural calamities
  • Death due to actions by the insured: Death by opting for extreme sports etc.
  • Death due to intoxication or narcotics: consumption of drugs, alcohol etc

cheapest term life insurance

Claim Process

The claim settlement process is provided in brief below:
  • Intimate the insurer regarding the claim
  • Document submission: original insurance document, proof of the claim, death certificate, medical records etc. as required.
  • Decision on the claim: Once the documentation has been submitted and verified, the insurer will take a decision on whether the claim will be honoured based on the documentation provided.

IRDAI Report

  • Go to IRDAI site
    Search for Annual Report and in annual report check claim ratios
  • A summary of claim ratios from report I found

Term life insurance comparison

You can easily do from the IRDAI report on its own.

You can also check my presentation on term insurance also and can watch my video for better explanation.

Please watch the complete video for proper understanding.

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This Post Has One Comment

  1. term insurance policy me tin sal pure hone ke bad agar kuch policyholder ko unfortunate ho jata hai to insurance company policyholder ke bare me inspection karti hai kya?

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