Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Reviewed By :
Prasad Pimple
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Published on : Jun 16, 2022
The principal purpose of term insurance is to serve as your family’s financial backup. A term plan’s cover remains active for a defined period. It provides a guaranteed sum to your nominee in case of an unfortunate event during this time span.
Term plans usually provide coverage for 5 – 40 years. However, if you need a temporary financial fallback for your loved ones, you can select a short policy period. Such a term plan with short tenure is known as a short-term insurance policy.
Features of short-term insurance
1.Death benefit: The policy pays the sum assured to your nominee if an unwanted event occurs during the policy term.
2. Tax deduction: The premiums for your short-term policy are eligible for deduction from your taxable income under Section 80C of the Income Tax Act, 1961.
3. Add-on covers: For a nominal increase in the premium, you can extend your base cover against possible contingencies and get:
- A lump-sum payout upfront on the diagnosis of life-threatening ailments covered under the plan
- Payouts on permanent disability due to an accident
- Extra payouts paid to your family over and above the base sum assured if untimely demise occurs due to an accident
4. Low premiums: Term plans have no investment feature. Hence, these policies typically require lower premiums than other life insurance products. Also, the premium amount depends on the policy period and the sum assured. Since short-term insurance policies have lower policy tenures, the premiums are usually low.
When to get a short term insurance policy?
If you have immediate financial liabilities that can burden your family in case of an unforeseen event, a short term plan can be useful. You can consider buying this policy if:
- You have an unpaid debt: The policy term can match the loan or mortgages repayment tenure. The payout will help your family repay the loan in your absence.
- Only a few years are left until your retirement: Term plans are often used to get financial cover throughout an individual’s working years. If your retirement is close, a short-term policy can secure your family’s financial health in the interim period.
- You are a senior citizen and your old life insurance is expiring soon: Many insurers allow term plan purchase until the age of 65 years. If you are over 60 years of age and expect your family members to attain financial independence soon, a short-term insurance policy can be apt for your insurance needs.
- The time to fulfil your financial liabilities is imminent: You may have to pay for your children’s higher education or wedding within a few years. In such circumstances, an unexpected event can derail your loved ones life goals. A short-term policy can safeguard against such uncertainties.
However, a short-term policy is not meant to replace the coverage your family needs to meet their living expenses in case of an emergency. You should use it only as an additional layer of financial protection over your existing life cover or bridge any insurance gap.
Conclusion
If you have a temporary need for additional life cover, you can compare different term plans online. Look into the benefits offered and premiums needed. Then select one for the duration through which you need coverage.
