Life risks are unpredictable and can happen at any time. The toll that they take is not just mental or physical. It can also be financial. While you may not be able to deal with them mentally, you can be prepared to deal with them financially. This can be done by purchasing term insurance for you and your loved ones.
This insurance policy provides financial protection and can help your loved ones deal with life risks. However, there are still many people who are not entirely aware of the different facts related to this policy. Read on to know more about such facts.
What is term insurance?
Term insurance is a type of life insurance policy. In this policy, you as the insured get into an agreement with your insurer. Under this agreement, the insurer compensates your loved ones with a sum assured in the event of your untimely demise during the policy term. The amount that your family receives would help them live a financially secure life and manage the expenses related to different life risks.
What are the lesser-known facts related to this insurance?
The following are the lesser-known facts that you as a potential or existing policyholder should be aware of:
- The amount of sum assured
When you opt for this policy, your loved oneare provided with financial coverage in your absence. This coverage is known as the sum assured. When you pass away, your family receives this amount. The life cover that your family would receive depends on the type of policy you purchase. When you purchase your policy at a younger stage, it is possible that you might opt for a lower life cover amount due to financial reasons.
However, it is possible to increase the life cover amount later on. Always make sure that your life cover amount is at least 15-20 times that of your income. This is mainly due to the fact that the cost of living could increase substantially when the amount is paid to your family. Make sure to select the correct amount of life cover.
- No maturity benefits
There are life insurance products such as ULIPs and endowment plans that provide maturity benefits once the policy term is over. This, however, is not the case with term insurance. This policy only provides life coverage to the dependents of the policyholder. If you look at this policy as an instrument of investment, that could be a risky move. There are no returns to be gained from this policy. So, invest in it only with the intention of financial security for your family from life risks.
- Always maintain transparency
When you purchase this plan, your insurer requires you to go through medical check-ups. Your age and medical condition play an important role in deciding the cost of the policy. Many times, people do not disclose their medical conditions to the insurer to avoid paying higher premiums. This, however, could be a dangerous move. When the nominee files a claim and during the examination of the claim, if the insurer finds out that your demise was caused by a condition not disclosed during the purchase, the claim could get rejected. Even if the claim does not get rejected, your insurer could deduct the actual amount of premium from the sum assured.
- Explore different plans
There are different types of term insurance that are available in the market. People are mostly aware of just one type of plan. However, there are different types of plans that you can opt for. One such example is the return of the premium term plan. In this plan, if the policyholder survives the term of the policy, the insurer will repay the entire premium paid towards the policy.
If you want to know other such facts or are looking for more details regarding them, you can get in touch with your insurance advisor.