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What is the Current Trend in Term Insurance?

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  • 9th Jul 2019
  • 1,483
What is the Current Trend in Term Insurance?

Life is uncertain and being financially prepared at all times is the best decision that you can take. This not only requires you to be very careful when planning the finances but you also need to have the right balance and make informed decisions. You need to remember that the financial decisions you make today will have an impact on your future. You need to make smart investment decisions by keeping the financial goals and possible risks associated with the same. The most important financial goal for you is your family’s wellbeing when you are around. There is no denying the fact that a term insurance plan is extremely important for the financial security of your loved ones. Such a plan will protect your family in case of an unfortunate event.

Traditional life insurance Vs term insurance

In order to choose the right type of insurance, it is important to understand the difference between traditional life insurance and term insurance. The biggest difference is the death benefit. In a term insurance plan, a death benefit will be provided at the time of the death of the insured if the policyholder dies during the policy tenure. On the other hand, in case of a traditional life insurance policy, the insured is provided with both maturity benefit, as well as, the death benefit. However, the sum assured in the case of death benefit provided by a term plan is higher than that of maturity benefit, which is offered by a traditional life insurance policy.

Another difference lies in the process of surrendering a policy. It is easier to surrender a term insurance policy as compared to a traditional life insurance policy. When it comes to a term plan, if you stop paying the premium amount, the policy will lapse. However, in a traditional life insurance policy, the maturity benefit will be provided only when you complete the period of the policy. In case you surrender the policy during the tenure, you will be unable to recover the entire saving part of the policy because only your premium amount will be paid back after specific deductions.

Current scenario of term insurance in the Indian market

The current scenario of the insurance sector has changed since the last few decades. With an increase in financial knowledge and the dissemination of the same amongst different classes of society, many people prefer to have a diversified portfolio. Individuals are not keen on putting all their money into one fund or in a certain type of investment. This is why people prefer to have a balanced utilization of different schemes in their investment portfolio. This means that a term insurance plan forms a major part of the investment portfolio but there are other factors, which are also considered. In addition to a term insurance plan, investors are looking for riders to get additional coverage at a higher premium. These riders come with a term insurance plan and provide comprehensive coverage to the insured.

With the advances in technology, it has become easier to look for different term plans and make a comparison amongst them. An increase in financial awareness has made life insurance an important part of financial planning. It is beneficial to own term insurance and life insurance at the same time. One will provide for life protection while the other will secure the financial future of your family.

- A Consumer Education Initiative series by Kotak Life

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