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The Insurance Regulatory Development Authority of India’s (IRDAI) December 2019 annual report reveals a meagre 2.74% life insurance penetration in India.
Indians are underinsured because of limited awareness about life insurance benefits and how such plans work. But if your loved ones’ livelihood depends upon your income, you need to safeguard their financial security in your absence. And term life insurance is one of the best instruments to ensure your family never lacks financial resources.
Hence, you need to understand what is meant by term insurance and how it works.
Term insurance is pure protection life insurance policy. It provides coverage for a defined period in exchange for a specified premium amount.
In case of an unfortunate event during this time-frame, the insurer provides a guaranteed# payout. It compensates your nominee for the loss of your income.
Affordability is a characteristic feature of term plans. Such plans do not include any investment component. The entire premium covers the mortality risk. Hence, term insurance provides sizable coverage at pocket-friendly rates. Thus, regardless of your budget, term insurance can cover your dependents’ financial necessities after an eventuality.
Your policy is the contract between you and the insurance provider in which you pledge to pay the required premium and the insurer provides the benefits in case of a valid life claim from your beneficiary.
The policy term is the duration of your life cover. If an untoward incident occurs within this period, your insurer pays the policy benefit to your nominee. You can choose your term plan’s policy tenure as per your insurance needs.
1. The agreement
A life insurance policy, including a term life insurance plan, is a legal agreement between you and the insurance company.You, the person who pays for the coverage, are the policyholder. You can buy the coverage for yourself or another family member. The person whose life is insured is the life assured.
You, the person who pays for the coverage, are the policyholder. You can buy the coverage for yourself or another family member. The person whose life is insured is the life assured.
As the owner, you have to pay the insurer a pre-decided premium. The insurer pays a fixed death benefit to your nominee if a contingency occurs while the policy is in force.
2. Filling out the proposal form
You need to disclose the following information in the term plan application form:
Based on such data, the insurer assesses the probability of your family raising a life claim. Factors that can elevate the premium amount include:
3. Assessing your requirements
4. Reviewing the premium quote
Based on your details, the insurer provides a premium quotation. When you make the payment, you get the coverage.
5. Covering increased insurance needs
Increasing term plans enhance your coverage at defined intervals, overcoming inflation. Some term plans also allow you to add to your life cover at your life’s milestones when your obligations increase.
6. Assigning a nominee
You need to name the person who will receive your term plan’s monetary benefits. It should be an immediate family member who will take care of your dependents.
Traditional term plans offer no maturity benefits. But some progressive term plans, known as Term plans with Return of Premium (TROP2), now return the premium paid if the policyholder survives the policy tenure.
Limited pay and one-time premium payment plans refund a part of your investment if you withdraw your policy before the termination date.
Tata AIA Life Insurance’s hallmark is its Claim Settlement Ratio (CSR), reported as 99.06%3 for the FY 2019-20. This CSR assures timely claim settlements in your family’s hours of need.
Tata AIA offers the following term plans under its Protection Plans segment:
Securing your loved ones against exigencies provides unmatched peace of mind. You can use a term life insurance plan to secure your family’s financial wellbeing. But to make the best use of this financial product, you need clarity on how term plans work. Then you can compare various schemes and understand the different conditions and exclusions. You can then select the one offering the maximum benefits at the lowest premiums.
By submitting your details, you are giving your consent to receive SMS/Call by Tata AIA Life Insurance Company Limited or its representative, with reference to this solicited inquiry even though you may be registered on the DND list. L&C/Advt/2019/Jan/075
# Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry
1 Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch
2 Return of all the premiums paid (excluding rider premium, extra premium and taxes) in case the policyholder survives till maturity
3Individual Life Claim Settlement Ratio is 99.06% for the FY2019-20 as per the Latest Annual Audited Figures