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Term insurance plans can help keep your family safe and healthy when you are not with them. It’s like an umbrella, meaning, term insurance protects your family from a financial crisis even when you’re gone.
Unlike a usual insurance policy, a term plan offers a higher cover amount and is generally considered an investment on behalf of your loved ones. Term insurance consists of the payment of a nominal premium, which is paid over a period of time. In the event of an unfortunate event of your death, your nominee is entitled to receive a large amount of money, known as the sum assured. However, as simple as it is, there are various nuances in buying term insurance. The perfect example of it is short-term insurance policies.
What is a short-term insurance policy?
While a term plan is the simplest form of life insurance, short-term insurance is another category that differentiates itself on the basis of the policy tenure. Usually, it is advisable to take out term insurance that insures your family up to at least your earning age. This generally spans up to 60 years. But you can opt for a short-term insurance policy that is between 5-25 years. Buyers take out a short-term insurance policy to meet their temporary needs. The main difference between short-term and long-term insurance policies is the duration. Here are the main features of a short-term insurance policy:
- Premium can be changed
The premium can be changed based on your preference for short-term insurance. On the contrary, long-term insurance requires you to lock in the premium you have to pay. The amount of premium can be increased or decreased, taking into account many factors such as income, rent, payments, and mortality rate.
- Renewable nature
You can renew your term insurance at any time, whether you have a 20-year policy or a 30-year policy. With this facility, you can pay the same premium and get the previously promised benefits.
- Tax benefits
Term insurance mainly attracts customers due to tax savings. Although experts advise that tax savings should not be a reason for people to purchase term insurance, many do so in accordance with Section 80C of the Income Tax Act, which provides tax benefits on the sum assured from taxation and on the amount paid as premium.
- Death benefit
In case of the death of the policyholder, the nominee is guaranteed a lump sum payout. Depending on the insurance plan, the amount may vary. Additionally, the sum assured can be received in many ways. These include lump sum payment, partial amount payment, annual, quarterly, monthly plans, etc.
- Add-ons
Probably the most underappreciated feature of short-term insurance is the benefit of add-ons. Add-ons will further strengthen your policy and help you get extra coverage. These riders cover everything – from disability and serious illness to income benefit and premium deduction. Most insurance providers offer customizable policies that offer and cover additional benefits.
- No survival benefit
While add-ons are one of the most attractive term insurance features, the lack of survival benefit keeps customers away from this product. What many people fail to understand is that term insurance is specifically designed to cover a short term, and that is why it has such a low premium.
Term insurance has become a necessity for people at different stages of their lives, regardless of their age and gender. Due to its pure protection nature, term insurance is not considered an investment plan, because the premium is used only to cover the loss. However, that same thing is what makes term insurance so appealing to customers. The lack of any savings or investment components means that the product is easier to understand and purchase, especially with the help of online tools such as a term insurance plan calculator.
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