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A life policy can be enhanced with additional covers, called riders, on payment of additional premium.

A life policy can be enhanced with additional covers, called riders, on payment of additional premium.   | Photo Credit: Getty Images/iStock

Term life insurance policy covers the risk of death during a chosen period

Term policy is a no-frills life insurance policy. It covers the risk of death during a chosen term, say 20 years or until the life assured reaches a specified age. Once that term is completed, the policy ceases and there is no maturity value for survival beyond the term. The premium for this policy is equally no-frills, making it the most value-for-money policy.

All Indian life insurance companies offer term policies and it is easy to compare premium rates for a given term and the life assured’s age through the premium calculators that every company has to have on its website.

For example, a 25-year old male will pay between ₹7,700 and ₹14,500 a year for a term policy until age 75 for a sum assured of ₹1 crore. This is for a simple scenario where he has a clear medical history and is not a smoker. This policy means that if the policyholder dies before age 75, and the policy is in force, their nominee will receive the sum assured. If the policyholder lives past their 75th birthday, the policy terminates and nothing is payable.

Many companies have a discounted premium if you buy the policy online through their website. This will suit many younger professionals.

The policy can be enhanced by taking additional covers, called riders, on additional premium payment. Riders cover specified additional risks, have a separate sum assured and can be opted for only at the time of taking the policy. Before you choose riders, see if your basic policy has any of the covers built into it.

Under the accidental death rider, an additional claim amount (being the sum assured under the rider) is paid to the nominee if the policyholder dies in an accident. Since the main policy will also pay the death claim anyway, if the death is due to an accident, this rider payout will be over and above that.

Death due to an accident while the policyholder was driving under the influence of alcohol or intoxicating drugs is an exclusion under the policy as is death due to accident when involved in criminal activities or in adventure sports, in hazardous activities or due to self-inflicted injuries or due to any sexually transmitted diseases or due to overdose of drugs or alcohol.

If the policyholder were to contract a terminal illness during the term of the policy, the sum assured will be paid during the policyholder’s lifetime itself. The rider for permanent disability due to accident carries a waiver of all future premiums for the main policy.

Riders for specified critical illnesses have the benefit of a lump sum payout if the policyholder is diagnosed with any of them, and some companies also carry a premium waiver for the rest of the policy term.

The policyholder’s spouse can be covered under the same policy through a rider.

What are the requirements to be met before you can buy a term policy? You have to show income proof that justifies the sum assured you want. Medical tests will be required for larger sums assured and companies have their own internal norms and requirements.

Please ensure you fulfil all the nomination requirements and keep your address and contact information up to date with your insurance company so that they can service the policy whether it is with regard to sending you premium reminders or processing a claim.

The writer is a business journalist specialising in insurance & corporate history)

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Printable version | Feb 29, 2020 7:33:30 PM | https://www.thehindu.com/business/Industry/giving-you-focussed-coverage/article30421750.ece

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