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Term Life Insurance is pure protection insurance for the person who insures his life. It is taken for a fixed duration to cover specific goals and liabilities such that if anything happens to the earning member, the family does not have to go through a financial crisis. The sum Assured is roughly calculated on the basis of annual income and the amount required for fulfilling responsibilities. It is considered the most basic form of life insurance that provides the best cover for the least Premium as compared to other types of life insurance plans.
If you have people dependent on your earnings, it is important to include a Term insurance among the insurance portfolio as it gives maximum life Coverage for the minimum premium paid it covers a variety of liabilities till your age of 65years or 70 years beyond which you might not need any life insurance for dependants. Advantages of Term Tnsurance
Low premiums: The premium for a term plan is lower than any other life insurance Policy at any given age for any given cover.
Better cover: It provides a better Sum Assured as Death Benefit to your dependents than any other life insurance product.
Flexibility of choosing the duration: You have the flexibility of choosing the duration for which you want the insurance. If you anticipate your liabilities to be over in a given period, you can take insurance for that much duration.
Option for return of premium: Some Term Insurance plans offer the option of return of premium. They attain a Maturity value. If you wish to surrender the policy before the maturity date, even then you get some amount back.
Drawbacks of Term Insurance
No cash value: Term plans offer only the death benefit. They do not have any cash value. So if you survive the term you have Insured for, the policy simply lapses.
Offers fixed duration cover: Term insurance can be taken only for a specific duration till a given age.
Premiums get higher if renewed at older age: If you take term insurance at an older age or wish to renew it at an older age after it has lapsed, the premiums are on the higher side.
Very high premiums for return of premium policies: If you opt for the return of premium option, the premium that you pay might be much higher than the regular term plan.
So term life insurance is a pure protection plan that should be bought to cover specific need during a specific time. It is important to evaluate of our needs, duration in which we expect to fulfill them and financial resources available.