Term Life Insurance

As the name itself suggest, the term life insurance is only for a specific period of time which ensures the coverage payment if the insured person died during the period of the term specified. Also, you can a get maximum coverage of 25 times of your current annual salary. But this also depends at what age you start the policy, your smoking and drinking habits, your medical history and other factors. The term life insurance policy only offers the guaranteed death payment and no savings benefit is provided by this policy as provided by whole life insurance plan.

Here is a very simple example that will help you understand this more clearly. Suppose, a person name Sam has a term life insurance plan for 10 years starting from the age 35. He pays a premium of 800 every month to get an insurance coverage of 50 lakhs. If Sam dies during the term of the policy, his family would get the insured amount i.e., 50 lakhs and on the other hand if there is no causality, Sam won’t be receiving nothing. Since, the policy is for limited time period and there is no saving component in it, this policy gives the maximum coverage for the least premium and is the least expensive life insurance policy.

People sometimes choose a whole life insurance policy over term life insurance. In the former one they end up paying 5-6 times more premium that the latter one. This put them in a worse scenario because the idea of life insurance is to get a predefined sum to your family in a death case of insured, but any plan that you take for the age 65+ might not help that much because your children at that time would already be independent. Instead, just by putting this extra 5-6 times money in mutual funds, blue-chip stocks or even bonds (if you are risk averse) you would be in much better position.

Though this plan provides guaranteed death benefit, you could also get a couple add-ons in the term life insurance policy by giving little extra premium every month. In case of a permanent disability or a critical illness that leaves you in a position not to work, the insurer will give you a particular sum that will help you and your family survive. As the family would be dependent on the coverage received in case of death of the insured, do not compromise on the insurance coverage.

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Published by Vanshaj Bindlish

Writing about the stuff that I consider worth sharing with you.

6 thoughts on “Term Life Insurance

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