Life insurance is no longer limited to those traditional endowment insurance plans. With the increasing customer needs, the availability of options in life insurance has increased. This includes a basic life cover, endowment plans, new age ULIPs, annuities and a pension plan which gives you regular income even after your retirement.
A term policy is the most basic form of life insurance that is simple to understand and easy to buy. These policies are pure protection plans which provide a particular amount of life cover (known as sum assured) for a fixed time frame (known as your policy term). The above two along with your age determine the premium you have to pay. The most basic term plans cover the risk of your death. If you survive the given time frame (known as policy term), the policy expires. So, the longer the policy term, the longer time your family members are secured.
But don’t be baffled with such plans because. Let’s understand term plan first.
It is a pure life insurance product that is pocket-friendly. This type of plan covers death risk i.e. it promises to provide a lump sum benefit at the time of death to the beneficiaries of the insured person. So in case the policyholder meets with an unfortunate event of death, then the nominee will receive the entire sum assured from the insurance company. This will help his family in getting financial stability. The premium for term plans is generally low because it doesn’t have an investment component.
Remember the basic terminologies associated with Term Plans:
The fixed amount that will be paid to your nominee after your demise
Any person of the age group between 18 and 65 is eligible to purchase a term insurance policy
It is the duration of the policy in which the policyholder’s life will be covered. For example, if a person of age 40 years wants to buy a term plan that will cover him till he turns 75, his policy term will be of 35 years. With the increase in life expectancy, it is advisable to seek for the maximum possible period as this will provide longer protection for your family members.
This ratio means how many claims an insurer settles. For example, if an insurer settles 920 claims out of 1000 in a year, the CSR comes to 92%. Young insurance companies often tend to have a lower CSR. But as time progresses, the number increases.