Term Insurance Life Insurance Policy

Term insurance is for a short period of years ranging from 3 months to seven years. Sum assured is payable only in the event of death of the life assured occurring during the period; but the assurance comes to an end, should the life assured survive.

The selected term premiums are usually payable throughout the term of the policy or till the prior death of the life assured. Term insurance policies are the cheapest policies.

Without profit term insurance issued at age 35 requires a single premium of Rs. 13.62 for a Rs.1,000 whereas the single premium rate for whole life without profit policies issued at corresponding age is Rs.519.69.

Term insurance policies are always ‘without profits.’

The term insurance policies are useful to those

(i) who need extra-protection for a short duration or
(ii) who need protection for long duration but are unable to purchase for the time-being due to ill-health or lesser income
(iii) a young businessman can take the policy to save the business-disaster during initial stage of business,
(iv) key-men’s insurances are generally on term insurance basis,
(v) a mortgagor of the property may be benefited by this scheme,
(vi) a father can take this policy during the period of education of his child, and
(vii) any such persons who are willing to provide insurance for a shorter period.

Term insurances are of the following types in India.

(i) Straight-Term (Temporary) Insurance

The corporation issues term-insurance for two years, which is also called as two-years temporary assurance policy. The sum assured will be payable only in the event of the life assured’s death occurring within two years from the commencement of the policy.

A single premium is required to be paid at the outset. The policies are issued only under, the without profits plan.

The proposes is required to pay the medical examination fee. The policy is not entitled to any surrender value and no loan can be granted on the security thereof because, it is not of accumulative nature and payment is not always certain. This plan cannot be converted into other plans.

This policy is beneficial to the dependents who are required to pay Estate Duty and to those persons who are given charity or donation of fixed property.

(ii) Renewable Term Policies

These policies are renewable at the expiry of term for an additional period without medical examination; but the premium rate will be altered according to the age attained at the time of renewal.

This policy is beneficial to those whose health are deteriorating and will be uninsurable at an advanced age. With the help of this policy, they continue to enjoy the insurance benefit without going under fresh medical examination.

However, the premium rate will be increasing according to the attained age.

The policy-holder can renew it many times provided the attained age has not crossed 55 years.

(iii) Convertible Term Policy

Under this policy, option to convert it into whole life or endowment policy is available.

In corporation, the life assured under this plan has an option to convert the policy, provided it is in full force, into either a limited payment life policy or an endowment assurance policy, without having to undergo fresh medical examination, at any time during the specified term except the last two years.

If the option of conversion is exercised, a new policy under the limited payment life-plan or endowment assurance plan will be issued as the case may be subject to the rates of premium and terms and conditions prevailing on the date of conversion.

In other words, the premium rates, will be increased according to the age attained.

This policy is issued only to first class lives.

Persons aged over 40 years nearer birthday at entry and those following hazardous occupation including persons in the Armed Forces will not be eligible for assurance under this plan.

Proposals on the lives of ladies are also not considered under this plan. Proposals for policies under this scheme will be entertained only from persons in government or quasi-government service, or in the service of reputed commercial firms.

The cost of medical, examination will have to be borne by the proposer. The minimum sum assured is Rs5,000 and the term is 5, 6, or 7 years.

Admission of age before issuing of policy is essential. Premium may be single, yearly or half-yearly instalments only.

No surrender values loan, paid-up values, no rebate in premium whether for large sum or for mode of payment of premium are allowed under this policy.

This plan is of much use to those who are initially unable to pay the larger premium required for a whole life or endowment policy.

This is useful to those who desire to leave the final decision of permanent insurance at later date. The premium rate is considerably lower in this case. It is specially suitable to a young man with large family just entering in life who, due to his low, income, is unable to afford high premium required to give him adequate protection under a permanent policy.