Saturday, September 30, 2023

What is a Term Insurance Plan? Explain it With Available Riders.

June 30, 2019 by  
Filed under Business, Health, Opinion, Weekly Columns

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( While searching for a comprehensive life insurance coverage that can be purchased at an affordable price, one answer that comes as a choice is a term insurance plan. However, many may ask – ‘what is term insurance?’, and what benefits does it offer? Well for them we are here providing a detailed description of term insurance with its riders.

What is term insurance?

Term insurance is basically a pure life insurance policy without any benefits of investment, maturity benefits, or surrender value. It only pays out the specified sum assured to the nominee when the policyholder passes away during the term of the policy. A term insurance plan can have tenure of 5 years to 30 years. Most of the term insurance plans provide the facility of add-ons or riders to enhance the basic cover. However, one has to pay an extra premium for adding the rider benefits. The term insurance sector is full of term plans with different rider benefits. In this situation, one may get confused in selecting the best rider for him/her. Therefore, to help in these cases, we are here discussing some of the riders provided by most of the term insurance plans:

Term Insurance – Riders

Term insurance riders or add-ons are the extra covers provided by term insurance plans to provide enhanced coverage to the policyholders. However, one has to pay some extra cost for purchasing a rider. Some of the common riders are:

  • Accidental Death Rider: This is one of the common riders provided by most of the term insurance companies. Opting for this rider, a policyholder gets the extra amount in lump sum apart from the basic cover, if the policyholder dies due to an accident. However, the premium of the accidental death cover depends on the sum assured amount. Another rider benefit that can be covered in accidental death benefit rider is cover for accidental disability. In this cover, if the policyholder becomes disabled as a result of an accident, then the insurance provider offers income to the diseased for a specific period according to the terms of the policy documentation.
  • Critical Illness Cover: A critical illness can be fatal and needs extensive medical treatment. Some critical illnesses are – cancer, heart attack, heart stroke, etc. Getting treatment of such medical conditions can be really heavy on the pocket of the policyholder and his/her family. However, a critical illness cover purchased with the term insurance plan can safeguard the policyholder by providing financial help. Most of the critical illness riders pay for the medical bills of the policyholder that come within the limit of the plan. On the death of the policyholder, the term insurance policy pays the sum assured to his/her nominee. It is recommended to purchase critical illness rider cover with term insurance plan if one has a family history of certain critical illness. A policyholder can go through the list of critical illnesses covered under the term plan. Most of the times, there is a waiting period of one year for availing the full benefit of critical illness cover. If an insured has some pre-existing medical conditions, then he/she should intimate the insurance provider before opting for a rider.
  • Terminal Illness Rider: Most of the people get confused between terminal illness and critical illness. While critical illness is a health condition that can be treatable, a terminal illness is a disease that causes death to a person such as cancer of the last stage. In terminal illness, the death may come within a few days or maybe in a few months. Regardless of the death, an insured with terminal illness rider gets the sum assured without waiting for the death as soon as he/she is diagnosed with some terminal illness.
  • Assured Monthly Income Add-On/ Rider: This add-on or rider is for getting monthly income above and over the sum assured to the beneficiary of the policyholder. A policyholder can either select increasing income or fixed income option and this is available only for a specific number of years. To understand it, we can take an example; a term insurance plan with this rider can provide monthly income equal to the 0.5% of the basic sum assured for five years after the death of the policyholder. Another example can be a term insurance policy with assured monthly income rider cover that offers an increasing income wherein the monthly income is increased by 10% at the end of each year until 10 years. Note: the figures in the example are fictional and are given for the purpose of explanation.
  • Waiver of Premium: In order to get the benefits of the term insurance plan, the policyholder must have to pay his/her premium for the complete term of the plan. Missing a premium may lapse the policy. However, having a waiver of premium rider safeguards a term plan from getting terminated. This is because this rider keeps the term insurance plan in force even if the policyholder is unable to pay the premiums due to permanent disability, critical illness, or any other unforeseen emergency. The insurance provider either waives off or pays the premium on behalf of the policyholder to keep the policy in force.

Summing it up!

Probably it must be clear to one by now that what term insurance is? Well, selecting a term insurance plan and finalizing a rider benefit both are difficult. Therefore, it is recommended to understand the requirements from a term plan full well and know the required rider benefits before ending up a term insurance policy. One can even compare different term insurance plans online with the help of an authentic insurance web aggregator.

Staff Writer; Doug Ross

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