What is term insurance?
Term insurance is one of the affordable forms of life insurance presently available in the market. By availing of this insurance, individuals select a policy term for which they expect to be provided with coverage and pay a premium on the same as opted by them. This premium may be paid on a monthly, quarterly, semi-annual, or annual basis, and based on what it amounts to, the insurance company guarantees payment of a sum assured on death of the life Assured. In the event that the insured individual dies within the policy term, the insurance company pays a death benefit to the insured individual’s nominee. The nominee may be paid a lump sum payment and/ or receive funds of a fixed amount or increasing amount on a monthly basis for a specified period of time as per the insured individual’s instructions which were made clear at the time of purchase of the policy.
What is a term insurance premium?
Term insurance premiums refer to the regular payments made by insured individuals to the insurer for the insurance coverage under term insurance policies. The amount of premium owed may vary from one individual to another and is calculated basis certain factors. Interested individuals can make use of a term insurance calculator which provides them with an estimate of what the term insurance premium ought to be. The amount of this premium owed is determined by taking into account a number of factors pertaining to the individual. They include but aren’t limited to the age, gender, medical history, current income, annual income, anticipated year of retirement, financial goals, coverage preference, the lifestyle of the insured individual, and the likelihood of a claim being made on their account.
Actuaries are employed by insurance companies to better assess and calculate appropriate term insurance premiums for various individuals considering several factors listed above. These actuaries are tasked with analysing risks likely in case of an unlikely event occurring or a claim being made. The higher the risk, the more pronounced the insurance premium.
Why are term insurance premiums more affordable than other forms of life insurance plans?
Term insurance premiums are known for being the most affordable form of life insurance plans as compared to other insurance plans. There exist a number of reasons which are responsible for their being budget-friendly and less expensive than other forms of life insurance. Some of these have been mentioned below.
1. Fund management charges aren’t applicable here
Since term insurance plans don’t operate like unit-linked plans, they do not have a fund that is required to be invested in and focused on. As a result, there are no expenses related to managing a portfolio or money. Insurance companies are therefore capable of vending term insurance plans at comparatively lower premiums.
2. Purchases made online can be more affordable
Many times, life insurance policies (including term insurance) purchased online are eligible for a higher discount in comparison to offline purchases. This is because the paperwork involved reduces and the distribution costs are lower in this situation.
3. Benefits of paying term insurance premiums on time
Insured individuals must strive to make term insurance payments on time such that they and their nominees can continue to take advantage of the benefits the coverage provides. Failure to pay premiums on time can result in the policy coming to an end (or lapsing).
Individuals can set up alerts on their calendars such that they don’t forget to make any premium payments and are on track with their laid-out term insurance plan.
How to pay term insurance premiums online and offline
Term insurance premiums can be paid in a number of ways. This could vary amongst the insurance providers, some of which are mentioned below –
- The insurance company’s official website has a premium payment portal that allows for net banking as well as other payment modes.
- Mobile wallets.
- The same goes for banks that may be given electronic clearing system (ECS) mandates which allow for premium deductions to be made from the insured individual’s bank account
- Renewal through third party applications like PayTM etc.
- Renewal through cheque payment which is the most conventional mode to pay renewal offline. You can either drop the cheque at the insurers branch or head office.
In the event that the insured individual chooses to pay the term insurance offline, they can either visit a franchise or provide an authorized collection agent with the premium. This may be submitted in the form of a cash or cheque, depending on the amount of premium.
Conclusion
Protect your loved ones financially by investing in a term insurance plan that is most appropriate to you and your family’s needs. Times are uncertain and the Coronavirus pandemic has added to it. Term insurance benefits could greatly help out your nominee during an unforeseen event.
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