Te insurance is a pure and basic type of life insurance product that all individuals should have it for their life coverage, helps to save their family from a financial loss in case of their death. In this article, we will provide brief explanation about term insurance.
Before know the term insurance, we have to know about insurance and its types shortly.
Insurance is defined as a financial instrument that provide a risk coverage against any loss occurred what one could insure. It is an invisible product and pays out a lump sum of money either on the loss or damage to replace it in a certain period of time.
It is also defined as one of the most effective risk management financial tool that provide protection to the thing one could insured from financial losses. The primary usage of insurance is to provide risk coverage against a contingent risk or any uncertain loss.
Categories of Insurance
There are two major categories of insurance in the insurance industry. Under that categories there are many types of insurance available to insure all the things that what people having themselves. The categories of insurance are as follows.
- Life Insurance
- Non-life or General Insurance
In these two categories of insurance contains many combinations of coverage and benefits that helps people to avail it according to their need.
1) Life Insurance
Life insurance is a contract between the life insurance company and the life insured, where the insurer promises to pay a sum of money or how much the life insured took a coverage himself to the designated beneficiary, upon the death of insured person. It is one of the few investment options that provide financial security to the people along with maturity benefit, including tax benefits. Even though having these much of benefits, the primary objective of life insurance is to financial security or income replacement for their family in the event of life insured’s death.
Life Insurance is not only providing security to the insured life, beyond that for achieving their life goals it plays an important part in their life. For that life insurance is designed in various types to fulfill the different goals in different stages of their life even the life insured is alive or not. The different types of life insurance are as follows.
- Term Insurance
It provides only life coverage of life insured in the event of death in specified policy term. Now a days the term insurance is available in the form of returning of premium that the life insured will get the paid premium at the end of the policy term.
- Traditional Insurance
It provides life coverage along with the maturity benefit as lump sum or in a period of time as income. In this type of insurance, the premium paid by the people have invested in various Government bonds and securities, which provide guaranteed returns. Depends on the maturity benefit it is categorized in to various plans as follows.
- Whole Life Insurance
- Savings and Investment Insurance
- Endowment Life Insurance
- Child Life Insurance
- Moneyback Insurance
- ULIP Life Insurance
This type of insurance is same as traditional insurance that it guaranteed only the life coverage of the insured and the premium paid by the people are invested in unit liked products, which is not guaranteed. But the maturity benefit depends on the market movements and profit arrived in the share market.
- Retirement Life Insurance
It is the combination of either traditional or ULIP insurance along with life coverage of insured. Depends up on the age the returns are changed as per the type of policy.
2) Non-Life or General Insurance
As the name itself, other than human life all asset y an insured, which may be having the chance of risk for loss or damage can covered under general insurance. In general insurance, almost everything can be insurable as per the acceptability of the insurance companies. The following are the different type of life insurance in India.
- Health Insurance
- Motor Insurance
- Home Insurance
- Marine Insurance
- Commercial Insurance
The following are the insurance offered under general category for covering the human life in an affordable cost.
- Accidental Death Insurance
- Accidental Death and Disability Insurance
The above insurance provide only coverage in the event of death or disability due to accident only.
Term Life Insurance
The main objective of the insurance is fulfilled in this term insurance by providing life cover in case of death of a policy holder. The insurance company will provide the death benefit amount to the beneficiary or nominee mentioned in the policy document. The insurance company will provide life coverage in a specified term mentioned in the policy document. The core objective of term insurance is to provide financial security to the policyholder’s dependent in the event of his death. If the policyholder survives till the end of the policy term, the policy will cease after the end of the policy term and no more coverage or death benefit provided.
Only the term insurance can provide huge risk benefit in an affordable cost. Generally, an individual can avail a life coverage about 20 times of their annual income. The premium of the term insurance varies depends on the age, gender, sum assured and the health conditions of the life to be insured. The insurance company could provide life coverage to the people who having some health problems too with the higher premium.
Importance of Buying Term Insurance
The term insurance used to provide financial life coverage to the life to be insured in y term in the event of death. Here the importance of buying term life insurance is given.
- To Secure Family’s Future
An individual who having dependents like spouse, parents and children or having responsible for their family members well-being should have a term insurance to secure the future of the family members in the event of their death.
- To Protect their Assets
If an individual or an earning member of a family had bought an asset like home, vehicles and any other things by getting the loan from a financial institution must have a term insurance. Because, the load of those borrowings will cause any hardship to their family members in case the death of the policyholder.
- To Minimize the Lifestyle Risk
Each and every individual and their family having their own lifestyle to live in the society. By taking a term insurance, a breadwinner of a family could ensure their family’s lifestyle in a same manner even after his death.
- To prevent from Uncertainties
Human life is made up of the happening of unexpected and uncertainties like natural disasters, accidents and any other virus pandemics. So, term insurance is very important that helps to make an earning member to stay prepared against those uncertainties.
Types of Term Insurance
The term insurance is classified in to various types depends on term and coverage. The types of term insurance are,
- Level Term Assurance
In this type of insurance, the life coverage amount remains same during the entire policy term.
- Increasing Term Assurance
In this type of insurance, the life coverage amount has increased every year in a certain percentage during the policy term.
- Decreasing Term Assurance
In this type of insurance, the life coverage has decreased in a certain percentage every year in policy term.
- Term Assurance with Return of Premium
In this type of insurance, a policyholder can get a lumpsum of money that he has paid during a policy period to get a life coverage at the end of the policy term if a policyholder alive.
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