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Term life insurance provides a protective roof over you and your loved ones' future during times of need. Through a term life insurance policy, your family becomes entitled to receive financial support if you succumb to fatalities. To keep the policy active, you must pay term life insurance premiums on time.
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The policy premium is a specific cost charged by the insurance company against a specified sum assured. Term life insurance premiums are decided through the policyholder's age, income, health, and life expectancy. The premium amount is fixed and paid throughout the policy term. Certain insurance companies offer the option of policy renewal.
It means that the policyholder can renew or extend the insurance if the policy is nearing maturity. This would increase the premium as it will be based on the policyholder's current age and health condition.
Payment of insurance premium is the only essential responsibility of the policyholder. If the premium is not paid, the nominee would no longer receive financial coverage as the insurance policy could lapse. However, there would not be any sort of legal action taken against you. Regular payment of the term life insurance premium decides the validity of your policy.
Insurance companies collect the premiums paid by policyholders to invest them in low-risk market securities further. These securities may be money market funds, bonds, or similar. At the time of claim settlement, the insurance company takes the funds from its investment income pool and puts them into a cash account. The money is then paid as a term life insurance claim at the time of settlement.
Through premiums, the insurance company earns interest and return on investment. Sometimes, the amount of investment income can surpass the cost of insurance claims. In such circumstances, the surplus amount of money would be kept as profit by insurance companies.
The process of premium collection by insurance providers is known as Risk Pooling. The insurer collects the premium you pay to cover the risk and pays off the policyholders who have suffered covered losses.
The following factors affect higher or lower term life insurance premiums paid by the policyholders:
Age of the insured: The age of the policyholder decides the amount of premium they have to pay to the insurer. The younger the person is, the lower the premiums are and vice-versa. It is because younger people usually have fewer medical issues and life responsibilities.
Medical history of the insured: If the insured's health history is favourable, the company will assign a smaller premium. If health records denote serious ailments, the company would evaluate the risks and increase the premium. This is done because serious ailments would require higher coverage.
Occupation of the insured: If the policyholder has a job that involves risky situations, they are considered high-risk candidates by insurers. Such people generally have to pay larger sums of money as premiums to mitigate the risk evaluated by the company.
Lifestyle of the insured: If the policyholder has a lifestyle involving risk to life, they would be seen as high-risk investments. Hence, they will have to pay higher premiums. On the other hand, insurance companies require low premiums from people who live a safe, risk-free life which is less likely to be dangerous to their lives.
Almost every company which provides term life insurance has a term insurance premium calculator on its portal. A premium calculator is an easy tool that enables computing how much premium you would be required to pay the insurance company.
It is a tool designed to calculate the premiums policyholders have to pay to keep their policy running. You can visit your insurance company’s official website to use their term insurance calculator. Enter your personal details and values of sum assured and add-ons. You can also try different combinations of values to arrive at adequate coverage.
Proceed with buying the policy by making an online payment. The details will be shared with you via email.
It is the insurance company's responsibility to pay out the death benefit to the nominees. Similarly, the policyholder must pay regular premiums to the company to ensure the policy's validity. Sometimes, situations are such that life insurance premiums are not paid from the policyholder's side because of different reasons.
To keep the insurance policy's legality, proper and regular payment of the premiums is of utmost importance. Every month/year, policyholders need to pay their premium before the due date ends. If not, the policy would fall into a grace period which the insurance companies provide.
Unfortunately, all insurance companies do not provide grace periods for failed premium payments that could lead to policy lapse. When the policy lapses, all the benefits are forfeited.
Term life insurance is a type of life insurance cover defined for a specific period. If the policyholder dies during the pre-decided period of the policy, the nominee will receive financial cover under the death benefit. The policy lasts only till the predetermined term of the policy.
Term life insurance is the most popular type of life insurance policy that people avail themselves of. This is because this type of life insurance plan is extremely pocket-friendly and affordable for people from low to middle-income groups.
The term usually lasts somewhere between 10 to 30 years. The policy term depends upon the choice of the policyholder. When deciding upon a suitable term for yourself, you must consider the size and nature of your family. If you have younger ones dependent on your income for survival, you must opt for a longer term. It would give them protection till the time they settle in life.
Note: Know what is term insurance first and then buy a term plan for your loved ones.
In term life insurance, the policyholder receives insurance coverage for which the insurance company charges a fixed amount (monthly or annual) against a sum assured. Some policies also offer investment options for the policyholders to grow their money. A few policies also have maturity benefits that pay a predefined amount to the policyholder upon surviving its term. Risk Pooling is the primary source of income for insurance companies, and it all depends upon the amount of premium which policyholders pay.
Note: Check out the best term insurance plan in India and choose one that suits your requirements.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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