Short-Term Insurance Plan: Everything You Need to Know

What is Term Insurance?

Term insurance is the most basic and simplest type of life insurance. It offers your family financial security at the most inexpensive rates. Term insurance allows you to obtain a significant amount of life cover at a low premium cost. The benefit amount is given to the nominee in the event of the death of the individual covered within the policy’s term.

When you are no longer with your family, a term insurance policy helps to keep them secure. It’s like an umbrella that protects your family from financial challenges and struggles after you’ve passed away.

What is a Short-Term Insurance Plan?

While term insurance is one of the most basic types of life insurance, short-term insurance is a further division depending on the duration. Usually, term insurance plans cover the policyholder till retirement, i.e. 60 years. However, one can also choose a short-term insurance policy that covers you for 5 to 25 years. Buyers purchase short-term insurance coverage to cover their short-term demands. The contract duration differentiates short-term insurance plans from long-term plans.

Things to Know About Short-Term Insurance Plan

  • Short-term insurance premiums can be adjusted: Unlike long-term insurance, where the premium amount is fixed and cannot be altered, short-term insurance premiums may be changed based on your preferences. The premium amount can be raised or lowered depending on circumstances such as earnings, tenancy, disbursements and death. You can use the term insurance plan calculator to know about premiums.
  • Can be renewable: Despite the common misconception that short-term insurance plans cannot be renewed, you may renew your term insurance at any time. You can pay the same premium and receive the same advantages as before with this facility.
  • Tax advantages: Term insurance appeals to consumers primarily because of the tax advantages. Under Section 80C, term insurance has some tax benefits. However, experts suggest that tax savings should not be the motivation for consumers to get term insurance.
  • Death benefit: If the insured individual dies, the promised money is distributed to the nominee. The cost may change depending on the insurance plan. Furthermore, the guaranteed money may be obtained in a variety of methods, including lump sum payment, half lump sum amount, annually, quarterly and monthly.
  • Additional rider benefit: The additional rider benefit is another important element of short-term insurance. Riders simply strengthen your insurance and allow you to obtain more coverage; these riders include anything from disability and critical illness coverage to income benefits and premium waivers. If your family has a history of severe sickness, these riders are recommended since they can shield your family from the high costs of diseases.
  • No survival benefits: The lack of a survival benefit is what puts consumers off from this policy. Most individuals, however, fail to realise that term insurance is especially meant to cover for the short term, which is why it has cheap premiums to make it practical when it comes to preserving your family concerns.

When to Get a Short-Term Insurance Plan?

A short-term plan might be beneficial if you have urgent financial responsibilities that could burden your family in case of an untoward event. One may think about purchasing during the below cases:

  • In case of unpaid debt: The policy term might correspond to the payback period of a loan or mortgage. The payment will assist your family in repaying the loan while you are away.
  • Near to retirement: Term plans are frequently utilised to provide financial security throughout an individual’s working years. If your retirement is approaching, a short-term policy can protect your family’s financial health in the interim.
  • You’re a senior person, and your old life insurance policy is about to expire: Many insurers will let you buy a term plan till you’re 65 years old. A short-term insurance policy may be appropriate for your insurance needs if you are over 60 years old and expect your family members to achieve financial independence shortly.

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