Term Assurance

It is one of the most pure forms of insurance and the most economical coverage money can buy. Unfortunately this policy is very popular in India. Indian life insurance sector has been pitching life insurance as an investment product, which is not entirely accurate. Insurance should be the last basket to invest in, after exhausting all other investment products. Term assurance covers the loss of income of the family in an event of the untimely death of the family bread winner. The Premium is paid to cover death during the term of the policy. In case the insured survives the term of the policy then nothing is payable. While choosing the coverage the following has to be kept in mind.

• The term of the policy should cover the income earning period of the insured.
• The sum assured of the policy should suffice the following
  • The monthly need of the family if the claim amount is invested in a simple bank FD and interest is withdrawn monthly.
  • The liabilities (loans) which the insured has taken e.g housing, car, personal etc.

Term assurance is cheaper if taken during the early years of life and becomes expensive as one grows older. Hence it is advisable to get cover at an early age as per the coverage required at the given time. As one gets older the income at risk and liabilities (loan) increase. Then one can add new term policies to top-up the coverage requirements.

There are lots of variations of this product available in the market. Some even offer certain level of premium refunds if the insured survives the term of the policy. it is also recommended to cover critical illness as a rider to the term policy. Riders and critical illness covered would vary from insurer to insurer.