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What is a term insurance plan?

What is term insurance?

Term insurance is a life insurance that provides a protective life cover to the policyholder. It is essentially a legally binding contract between the insured and the insurer. The person investing in the term plan agrees to pay premium charges to the insurance service provider. In return, the insurer promises a protective financial cover over the life of the insured person. The insurance cover offered by a term insurance plan is valid only for a particular term. This term can range from 10 years to 30 years or more, depending on the age at which you invest in the plan.

How does term insurance work?

Term insurance is a simple insurance instrument option that offers many benefits. Understanding how it works can help you see why it’s an essential investment for you and your family. Here are the key points about how a term plan functions:

  • When you invest in a term insurance policy, you agree to pay premium charges to the insurer.
  • This premium can be paid as a lump sum amount or as periodic payments.
  • If you choose to pay your premium periodically, you can do so on a monthly, quarterly, semi-annual, or annual basis, depending on the plan you opt for.
  • In return, the insurer offers you a protective life cover.
  • In case the policyholder passes away during the term of the plan, the insurer shall pay a sum assured, also known as death benefits, to the beneficiaries of the insured person.
  • If the policyholder survives the term of the plan, no benefits are paid out by the insurance provider.

Who needs a term insurance plan?

Read on to learn more about the goals you should be setting with your term insurance policy in line with your increasing age.

The Young and Unmarried:

As a young and unmarried adult who is earning their living for the first time, it may be important to think of your responsibilities towards yourself and your parents. Especially if your parents are close to retirement and might not be too well disposed towards taking care of their own health, you might be keen on doing the best you can for them. Your term plan, at this stage of your life, is expected to ensure that your parents are taken care of in case anything happens to you.

Those who are Newly Married:

Once you are married and on your way towards starting a new family, your priorities are likely to change. While you would still want to ensure your parents’ well being in case something happened to you, your responsibilities would now expand to include your new spouse. When you start a new family, additional responsibilities may also crop up as you take loans to buy a new home or car. Your term insurance policy may now extend to ensure that your spouse is not left with a huge burden of debt in case you are no longer around to help repay the loans. Additionally, you might want to help your spouse get term insurance as well at a reasonable rate. You could opt for the iSelect Star Term Plan, available with Canara HSBC Oriental Bank of Commerce Life Insurance Company, through which you can add your spouse into the same policy with discounts on the premium rates for your spouse. Since you can augment your coverage at different stages of your life, this policy is perfect for any stage of your life and can be the ideal insurance tool for you.

Those who have Young Children:

Children change the structure of any family from the minute they are born. The parents start focusing on their responsibilities towards the child, and begin to dream about the child’s future. At this point in your life, you will want your term insurance plan to be more inclusive and wide enough that it can help your child achieve their dreams in the long term.

Parents of children in High School:

The cost of education is enormous and continues to be on the rise. Higher education is especially expensive and as a parent, it is natural that you want to be prepared to spend a large amount for ensuring your child can study whatever they wish to and follow their dreams comfortably. No parent wants to stifle their children’s dreams owing to a lack of funds and with the ideal term insurance plan, you can make sure that your children are never compromising on reaching their goals.

Those nearing Retirement:

Retirement is a time of your life that you need to begin planning for early on in your life. Ideally from the time you begin working, you should start setting aside funds that will come in useful when you retire. However, even if you haven’t, there is no cause for worry. All hope is not lost if you have opted for a term plan which increases coverage with changing stages of your life.

Frequently asked questions:

  • What is term insurance rider?

    Insurance Riders are add-on benefits that help expand your basic term insurance plan coverage. These can be added to your base policy at a nominal rate. Some of the popular riders include Waiver of Premium Benefit, Accidental Death Benefit, Permanent or Partial Disability Benefit and Child Support Benefit.

  • What affects my term insurance premium?

    When you buy a policy, premium is calculated through a deep analytical process known as underwriting, which uses statistical and mathematical calculations around your details to calculate an amount. Factors that affect this decision include your age, medical history, smoking & drinking habits, profession, hobbies, lifestyle among others that reflect the risks involved.

  • How can I choose the best term insurance plan?

    When choosing a term insurance plan, consider and compare factors like the cover amount being offered, payout options, riders, and premium payment options available. Do not prioritize premium amount as a factor because a little extra premium sometimes goes a long way to protect your family financially.

  • Should I buy term plan online?

    Yes, you can buy a term plan online, from the convenience of your home. In fact, online term plans offer an opportunity to compare different plans, their premiums and save time. Also, buying online plans directly from an insurer’s website may help you save on premiums.

  • How long do term insurance policies last?

    Depending on the type of term plan you choose, regular plans can cover you up to the age of 60, while whole life covers you until you turn 99 years old.

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