Term Insurance Basics

Have you thought what will happen to your dependents and your responsibilities if something untoward happens to you? What will happen to your children’s education? Where will your family live, what happens to the loans that you have taken, how will they fulfill their daily requirements?

A low cost life insurance with high risk cover, term life insurance, might just be the solution. The purpose of term insurance is to replace your income in case of an eventuality. If you have adequate term insurance and such a situation arises during the specified term, your life insurance amount will make it possible for your family to have sufficient funds to take care of your basic responsibilities and remain self-sustaining. Term Insurance is taken for a fixed duration generally up to 30 years or up to the maximum renewal age specified by the insuring company. It provides coverage till the time you maintain the insurance and ceases if you outlive the term. In its true sense, there is no cash value acquired on a term insurance plan (without return of premium) unless it has a return of premium condition attached.

Buying a term insurance is almost hassle-free except that you might be required to undergo a medical examination to assess your health condition. Also, it is a good idea to consider some basic points of references from different companies offering same or similar term plans.

Points to consider:

 • Option to Convert Plan

Some term plans offer the facility to convert it to other traditional plans like endowment plans or money back plans etc. at a later stage. Convertibility feature might prove useful if during the policy term you do not feel the need to continue term insurance and would like to switch over to another plan.

• Smokers and Non-smokers Criteria

Keeping in mind the fact that tobacco users are at higher health risk, some insurance companies have separate premium structures for smokers and non-smokers. In such cases, premiums for non-smokers or non-tobacco users might be much less than those for smokers or tobacco users.

• Terrorism Cover

Although Term Life Insurance covers death due to any reason, terrorism may or may not form a part of it for all life insurance companies. Depending upon your need to cover death due to act of terrorism, you must check if your shortlisted companies are providing the cover or not.

• Availability of Riders

Some insurance companies offer riders like accidental death benefit , dreaded diseases rider etc. These can be taken along with the basic term life insurance plan. Riders come with an added cost and are valid up to a certain age. The riders give an added support in case of death or benefits as mentioned in policy contract.

• Renew Upto Age

Each insurance company specifies maximum age up to which the insurance can be renewed (65-70 years of age) called the “renew up to age”. Maximum duration for which one can take term insurance is also specified (up to 30-35 years duration). These two are important factors in deciding the maximum term for which you can take insurance.