Term insurance is a form of life insurance that offers Risk cover with zero Maturity benefits and zero surrender value. Term life insurance runs for a fixed term and offers death benefits if the Policyholder dies before the expiry of the term of the policy. If the individual survives, then the money paid lapses.
Popular Despite Not Being Good Investment Option
Term insurance is popular because it is a simple, inexpensive and effective way to protect the family from financial consequences of the death of the policyholder. A Rs. 1 crore term life insurance Policy will not cost more than Rs. 8,000 at 2012 rates. An endowment policy of similar value will cost twice or thrice the Premium charged for term cover. Term life insurance is the best solution for proper risk management offering high cover even for low income earners.
Options to Extract More Value from Term Life Insurance
To make Term Insurance more attractive, life insurers have come up with variants designed for those individuals who want something more than just death benefit. These variants do not change the basic nature of term insurance but help extract more value for the money paid.
This rider helps the survivors receive twice the sum Assured if an accidental death occurs. This means the family will get double benefits to manage the consequences of the unexpected and unanticipated death of the family member.
This rider will ensure the policy offers benefit in the event of partial or total disability of the life Insured due to an accident. This removes the anomaly where the policy provides returns in case of death but does not provide any returns when the person ceases to be a productive and healthy individual due to an accident.
- DREADED DISEASES/ CRITICAL ILLNESSES RIDERS
This rider enables the insured individual to receive an amount equal to the Sum Assured when diagnosed with one or many predetermined critical illnesses. Like other riders, this rider enables the life insured to enjoy additional protection over and above the Death Benefit at an extra cost. The death benefit component remains untouched even as the individual enjoys benefit from the term life insurance policy before his or her death.
- ACCELERATED EXTENDED RIDERS
The Riders mentioned above offer protection over and above the death benefit. This rider enables the policyholder to Claim a higher amount towards Critical Illness care. The excess amount claimed shall be deducted from the death benefit. Let us presume the insured has Rs. 1 crore death cover and Rs. 1 crore critical illness rider cover. With this rider, the policyholder can claim Rs. 1.5 crores for critical illnesses. The death benefit will come down to Rs. 50 lacs after the adjustment. This rider offers additional flexibility in treatment of critical illnesses.
Some term life insurance policies work like an endowment policy and offer a surrender value. A portion of premium paid is returned at mid term and the remaining is repaid at the end of the term. The Surrender Value will be equal to the total premium paid and not the death benefit assured by the policy.
The policy holder can choose to increase the sum assured when landmark events occur in his or her life. The sum assured can be increased by 50% upon marriage of the policyholder or by 25% upon the birth of a child or by a fixed percentage on the 1st, 3rd, or 5th anniversary of the policy. This helps the policyholder streamline premium costs and ensure the value of the policy increases as lifestyle improves.
The term insurance policy
can be obtained for the tenure of the mortgage. This ensures the survivors will be in a position to repay the mortgage in full even if the policyholder dies before its completion. This is the most preferred option as far as term life insurance policies are concerned.
This means that one should not reject term cover just because it does not offer any maturity benefits. One should go in for riders as necessary but term life insurance should still be a part of one's risk management strategy.