The covid-19 pandemic disrupted the world and affected several lives. It made people realize the importance of health and of having a financial shield for their loved ones. In uncertain times, individuals want to ensure that they leave enough money for their families in their absence. This has led to more and more people buying life insurance after the pandemic began, as they realize how crucial it is to have a life cover. While there are several types of term insurance out there, more and more people are choosing term insurance.
What is term insurance?
The meaning of term insurance, in simple terms, can be considered as a life cover for a specific period. When you buy a term plan, you, as a policyholder, come to an agreement with the insurance company. According to the agreement, in case of your sudden demise within the term of the policy, your nominee will receive a certain sum assured. In return for the sum assured, you will pay premiums to the insurance company. Being a policyholder, you choose the tenure of the term plan, the sum cover, as well as the frequency of premiums.
In its purest form, the meaning of opting for life insurance is all about providing comprehensive financial protection to your loved ones in your absence. There is no investment or saving component attached to a pure life insurance plan or term plan. Unlike traditional insurance, term insurance provides an extensive sum assured for comparatively lower premiums. Several people buy a term plan because of their pocket-friendly premiums. However, things have changed lately as the term insurance premiums are likely to increase.
Why are term insurance premiums rising?
One of the biggest selling points of term insurances was their affordable premiums. However, things changed in 2021. Because of the Covid-19 pandemic, in 2021, life insurance companies have received four to five times the usual amount of death claims, when compared to previous years. Insurance companies have, in total, paid claim settlements amounting to Rs.12948.98 crores. The sudden rise in claims is the reason insurance companies all over the world are considering increasing their premiums. The sudden rise in claims has adversely affected the profits of the insurance companies.
The rise in claims is the reason behind the increase in premiums of term insurance. From January 2022, the new customers of term insurance will pay 25-40% more premiums than the existing policyholders. Use a term insurance calculator to get an estimate on the new premiums. You will see this increase on both online and offline platforms. Many people prefer buying term insurance online because of their low premiums.
What should one do if they have no life insurance?
If you have already purchased term insurance beforehand, things will remain unchanged. Insurance companies lock the premiums on term insurance from the day of your purchase. Whatever is the existing premium rate, the same remains till the end of your tenure. The existing premiums will remain unaffected by any premium hikes.
If you do not have a term policy, now would be a good time to buy one. Insurance companies do not increase term insurance premium rates in one go. Instead, they prefer to increase it over the long haul. It is best to buy term insurance at the earliest to avoid having to pay a higher premium in the future. Also, it is important to remember the purpose of buying term insurance. In these uncertain times, it has become even more vital to have a life cover.
Are term insurances worth buying?
A term plan provides financial protection for your loved ones. It ensures that in an unfortunate event, where you, as a policyholder, lose your life, your family has enough funds. Use a term insurance calculator online to get an estimate on the premiums and life cover. You want to ensure that the sum assured is enough to fulfill the needs of your family and to repay any debts you may have.
Buying term insurance means safeguarding your family’s future in your absence. The rise in the rate of premiums is inevitable and was bound to happen at some point. However, irrespective of the rise in premium rates, term insurance still offers high coverage at a low cost when compared to other types of insurance. Also, the term insurance premiums that you pay on your term plan are exempt from taxes.
