8 Lesser Known Facts About Term Insurance Plans

We know that term insurance is a useful financial product to secure the future of your loved ones. But there are some facts about it that are not very well known among many. Read the blog to know about these lesser-known facts about term insurance plans.

Life insurance has become an absolute necessity for nearly everyone today. It is only because of the nature of this financial product, providing financial security to your loved ones in the unfortunate event of your demise. The most valuable and extremely helpful product in the life insurance category is term insurance. It assures lifetime coverage to the insured along with ensuring a monetary death benefit to his/her chosen nominees or beneficiaries (family member/loved one) in case of the death of the policyholder.

For this reason, a term insurance plan is highly useful to all, particularly in today’s uncertain times. However, what most people are not aware of is the fact that there are a couple of things with regard to term insurance which are lesser known. In fact, they can very well be termed as myths surrounding term life insurance which do the rounds and are often misrepresented.

This blog aims at busting these myths and presenting the true facts with regard to a term life insurance policy so that you can make an informed decision before purchasing one. So read on.

8 Facts About Term Insurance That You May Not Know Of

We all know what term insurance is and its utility in our lives today. However, what we don’t know about a term insurance plan is the following:

1.Term insurance is relatively cheaper than other life insurance products.

The general buzz in the market is that term insurance plans are costlier in price than other life insurance policies. However, truth be told, a term insurance policy is designed to offer higher coverage to the life insured at a relatively lower premium amount that can be easily afforded by the common man.

For instance, life insurance products such as Endowment Plan, Money Back Plan, or Unit Linked Insurance Products (ULIPs) generally offer coverage up to 10% of the annual premium payable. However, this is usually not sufficient to cover the financial needs of your family in case of your untimely demise. This is where term insurance scores over, providing a higher sum assured to the beneficiary in case of the death of the policyholder. Moreover, higher sum assured is promised at almost the same rate of premium payable under the plan.

2. Buying term insurance is simple and hassle-free

As soon as one hears the term ‘insurance’, it brings to mind the image of a long, hassled process requiring filing and signing of several documents before the insurance policy is issued by the company.

For this reason, most people often show reluctance in buying a term insurance product offline. However, the fact is that obtaining a term insurance policy is fairly simple and can be done in literally no time when you book one online. All you’d be required to enter is your vital details, including your age, your lifestyle habits (smoker/non-smoker), and your present medical condition (if any).

Once you enter these details online, you can buy a term insurance plan in no time. You can even download a copy of the policy for record purposes.

3. Term insurance plans do not provide a lump sum maturity benefit but only a monetary death benefit to the policyholder’s nominee

Since term insurance falls under the broader umbrella of life insurance, it is generally believed that it offers a lump sum amount at the time of maturity of the policy, just like other insurance products. However, it must be clearly noted here that term insurance is slightly different from other insurance policies in this regard.

A term insurance plan does not provide a lump sum benefit upon policy maturity to its holder. Instead, term insurance is specifically designed only to offer death benefit to the beneficiary or nominee of the life insured/policyholder in case of the latter’s demise. This is payable anytime the policyholder has an unfortunate and untimely death, in order to protect the financial interests of their family in their absence.

4. The rejection rate of term insurance plans isn’t very high

This is another misbelief among a number of people buying term insurance plans. They feel that most claims made after the death of the life insured are rejected by the insurance company; hence, they don’t consider buying term insurance in the first place.

The truth is that most insurance companies in India have a fairly high Claim Settlement Ratio (CSR). The CSR of a company is the proportion between the total number of claims received for death benefit by the nominees of the deceased policyholder and the total number of claims approved by the insurer in that fiscal year.

Now, according to the latest annual report presented by the Insurance Regulatory Development Authority (IRDA), most insurers in India enjoy an average CSR of 85.3-99.07% for death benefit claims in a financial year. In simpler words, for every 100 term insurance claims made, only 15 are rejected. This means that there are more number of approved claims in term insurance than you think!

5. Term insurance policies can be customized to preference

Did you know that not all term insurance plans are standard policies offering the same feature to all policyholders – monetary death benefit? Contrary to popular belief, term insurance can indeed be customized to suit individual needs and preferences. For instance, prospective buyers are given the option by insurance companies to include add-on riders to the base insurance plan to enhance its coverage beyond just death benefit. A few examples include critical illness rider, accidental death benefit, and the like.

Besides this, some term insurance policies also offer the flexibility of return of premium to the policyholders in case they are not satisfied with the purchased plan. In addition, the insured can increase or reduce the tenure of the plan or also opt for a convertible term insurance plan.

6. You need a term insurance plan even if you’re single or have no children

The general understanding of a term insurance plan is that it offers a death benefit upon the demise of the policyholder to their spouse or children who are dependent on the policyholder for everyday survival. This leads some people to believe that if they are unmarried or have no children to support after they’re gone, they wouldn’t need to invest in term insurance.

The fact is that everybody needs term insurance in today’s times, whether or not they are married or have children. This is because everyone of us has financial responsibilities which we wouldn’t want to involuntarily impose on our family and loved ones after our death. Say, you buy a home or car on loan. In case of an unfortunate untimely demise, the debt burden would come on your family (parents) to pay it off in your absence.

This means that even if you choose to stay single, you still need to think of your loved ones around you for their life after you.

7. Term insurance should be bought even by those who are not breadearners for the family

This is another misconception regarding term insurance plans in India. Most people believe that only the working and earning members of the family need to purchase term insurance. This is because they can pay the premium for the plan throughout their life and after their death, the benefit can be transferred to their dependents to manage the future expenses.

However, term insurance should ideally be purchased by every member of the family, even those who are not its breadwinners. This includes women and the elderly. The reason for this is that in case of death of any family member, working or non-working, the monetary death benefit will be provided to their surviving family members.

8. The sum assured under the plan should at least be 20 times of your annual income

Most people are not aware of how much sum assured to choose at the time of buying term insurance plans. As a result, the amount chosen is sometimes not sufficient to provide coverage for their family’s needs in their absence. The general rule of thumb to follow when deciding on the sum assured for a term insurance plan is to choose an amount that is at least 15-20 times your annual income. This would ensure that inflation is well taken into consideration in the future, meaning that in case of the unfortunate demise of the policyholder, the sum assured should be adequate to cover the rising costs and expenses of the family members.

Read More: What Are The Tax Benefits Of Term Insurance?

Wrapping Up

These were some lesser known facts about term insurance which should be known before purchasing a plan. Hope the information in this blog helps. To know more about term and life insurance or to choose the best term insurance plan for your loved ones, visit PayBima.

Found this post informational? Browse PayBima Blogs to read interesting posts related to Health Insurance, Car Insurance, Bike Insurance, Term Life Insurance and Investment section. You can visit PayBima to Buy Insurance Online.

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Keyman Insurance Policy – A Detailed Guide

Keyman insurance is an important form of business insurance where protection is offered by employers to key employees to safeguard them from unforeseen events. Let us get details of keyman meaning.

Insurance plans safeguard individuals or families from sudden events like accidents, illness, death etc. There are various types of insurances with varying features that offer coverage to individuals and groups to secure them against financial crunches. However, it is important to understand such plans before purchasing them because there are many minute details which are involved and which you should know.

Like individual and family insurance policies,  plans are also available for businesses and groups to cover employees and their needs. As such, no organization can thrive without their employees. And so, it becomes the responsibility of the organization to protect them from unforeseen events. There are many insurance plans that allow employers or businesses to cover their employees under the right plan against untimely deaths or unfortunate incidents. All they need is to research well and buy the best plan to suit the requirements of the organization and their employees. One such type of insurance is the keyman insurance plan, which we are discussing in this blog.

Table of Contents

• Keyman Insurance Policy
• 8 Benefits of Keyman Insurance Plan
• 3 Eligibility Criteria Required for Keyman Insurance
• 4 Key Considerations before Buying Keyman Insurance
• How to Calculate the Premium amount of Keyman Insurance?
• What will happen to the plan if a key employee quits the company?

Keyman Insurance Policy

A keyman insurance is a plan that is purchased by the employer of a company or business for their employees. In this case, the proposer and the premium payer of the policy is the employer and the insured person is the employee. So, a key man policy is ideally meant for an organization who want to secure the lives of their employees against the risk of unexpected incidents, accidents or death. Under this plan, the employer proposes the policy as well as pays the premium to secure their employees from risks. Hence, the life insured under these plans are the employees, while the benefit of claims goes to the employer. So, in case there is a death of an employee that takes place during the tenure of the policy, the death benefit will go to the employer. The employer, on its part, compensates the family of the employee so that they can manage their burdens accordingly.

However, it is necessary for employers to know keyman insurance meaning and the terms and conditions of such plans well before investing their money.

8 Benefits of Keyman Insurance Plan

Below are some benefits of the keyman insurance plans:

1. These policies help businesses to overcome monetary loss in the event of a premature demise of a key employee of the organization
2. The plans allow coverage to the family of the deceased employee by taking care of their essential monetary needs
3. These policies support the morale of key employees in an organization and takes care of their family’s requirements to allow them mental peace
4. Also, under keyman insurance policy taxability option, employers can seek tax rebates under these plans as the premium paid under this insurance type comes under the category of business expenses on which the insured can claim tax rebates
5. They further improve the value of a business, especially during the times of business expansions
6. The keyman insurance also allow steadiness of shares of a company in the event of demise of a key employee
7. It further improve the credit of a company which might be affected due to the death of a key employee
8. Having keyman insurance supports in meeting liabilities and avoid financial crisis

3 Eligibility Criteria Required for Keyman Insurance

Below are the requirements needed at the time of buying keyman insurance:

1. The first criteria is that the key employee should have below 51% stakes in an organization where the person is working.
2. The second criteria requires that the key employee and his/her family must hold below 70% shares of the business.
3. The organization must prove to the insurer that the roles performed by the key employee is significant and critical for the organization.

4 Key Considerations before Buying Keyman Insurance

1. You must note that under keyman insurance the employer cannot select rider option
2. Under such plans, the employer is not just the nominee but also the policyholder
3. Keyman insurance plans do not allow the insured to take loans under the policy
4. Here, the employer makes the payment of the premiums after considering the coverage for employees

How to Calculate the Premium amount of Keyman Insurance?

To calculate the premium of a key man insurance plan, employers can use a keyman insurance premium calculator online. Calculating the amount will help employers to choose the right policy and take the right decision at the time of investing money under such plans.  To calculate premium amounts with high accuracy, the employer is required to enter proper details, which is used by the calculator to calculate the value.

What will happen to the plan if a key employee quits the company?

• If an employee or keyman quits an organization, the employer can stop making payment of the premiums and let the policy lapse.
• Also, they can come to a mutual agreement with the insurer to transfer the policy to the new employer whom the employee is joining.
• Further, the company can assign the policy in favor of the keyman or the key employee.

Read More: Defining Survival Benefit in Term Life Insurance Policy

To conclude

Now you know the keyman insurance policy meaning and you also know that it serves multiple purposes to a company. But, it is important to consider everything before buying a keyman insurance online to save time and money for the employer. Further, this will help you to know which of the losses are covered under keyman insurance  by means of comparison.

However, the employer should understand the purpose of buying the keyman insurance before investing the amount. Further, they should be well versed with the terms and conditions of the policy as different insurers might have different terms of the policy.  Thus, the employer should assess and compare the various available plans online.

Found this post informational? Browse PayBima Blogs to read interesting posts related to Health Insurance, Car Insurance, Bike Insurance, Term Life Insurance and Investment section. You can visit PayBima to Buy Insurance Online.

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