Insurance 101: Know the Difference between Policy Term & Premium Payment Term
Opt for a plan that affirms to help you and your loved ones from any financial distress and live with some much needed ease.
Coronavirus, bird flu, air pollution - there’s more than one issue that adds to our already stressful lifestyle today. Almost 100 million people across the world have already been infected by the deadly COVID-19 virus with over 2 million deaths have been reported so far.  To add to the worries, new strains of the virus are being discovered.  In such a world, the desire to protect ourselves and our loved ones is only natural. So much of our efforts are put in to ensure a secure future.
Here’s where term insurance comes to play. Simply put, term insurance is one of the affordable insurance plans that provide coverage for a specific period of time. It meets the needs of most individuals and provides financial protection to the nominees of the policyholder/life assured in case of sudden, unfortunate demise of the policyholder.
By opting for a term plan, you ensure that even if you are not there to personally care for your dependents, they can still lead their lives and achieve their financial goals. So your spouse can stop worrying about your children’s wedding. Your children can still go to the college of their choice. They can all still live in the house you bought for them but could not pay off the loan for. Because in case of unfortunate death of the policyholder/life assured, his or her dependents receive the death benefit, either in a lump sum or in instalments, thereby helping them to maintain their lifestyle and meet their life goals.
But with a myriad plans available, picking a suitable plan is often a complex exercise. However, a deeper understanding of the term plan policies and how they work can help one take the right decision.
Understanding how much coverage you need is the first step. Typically, financial advisors recommend having a term insurance policy for a sum assured of 15-20 times your current annual income. This then needs to be reviewed from time to time. For instance, if you take a home loan, it would be advisable to increase your sum assured to cover that liability as well.
Once you have a fair idea of how much insurance you need, then comes the need to evaluate different plans available in the market. In this article, we take a step in the direction of better understanding the jargon associated with such policies and explain what policy term and premium payment term means in case of a term plan and how they are different.
- Policy Term
Each term insurance plan covers the insured person for a certain period of time. This time period is called the policy term, that is the duration till which your policy will remain active provided you are paying your term insurance premiums on time. To sum up, the policy term is the lifetime of your term insurance.
- Premium Payment Term
Premium payment term is the total number of years the policyholder has to pay the premium. For the ease of the policyholder, insurance companies today provide a lot of flexible options as to how and when they wish to make the payment.
One can either opt for a single premium payment, which means paying the entire premium as a lump sum amount at once.
The more common mode is the regular premium payment wherein the premium is paid at regular intervals for the entire policy term; i.e. monthly, quarterly, bi-annually or annually.
Limited premium payment is another option. As the term suggests, it means that the premium has to be paid for a limited or fixed amount of time within the duration of the policy, or the policy term.
Basically, policy term and premium payment term are the first and foremost factors that you have to consider while choosing your term insurance plan.
You could consider term plans by Bajaj Allianz Life Insurance that offer a host of additional benefits. It also gives you the flexibility to pay the premium of your policy monthly, quarterly, half-yearly and annually. Moreover, you can even change the premium payment frequency on any policy anniversary, subject to policy terms and conditions. You could also use the term insurance calculator on their website to determine your insurance amount that could meet your needs and help you secure your family and get their life goals done.
With a claim settlement ratio of 98.02 per cent*, Bajaj Allianz Life serves the needs of its policyholders with utmost care. Moreover, the various riders or additional optional coverages that you can opt for at a nominal extra cost also add significant value to your insurance coverage.
The idea of uncertainty always dangles on our heads. Having that protective ring around your family is therefore, more essential than important. Opt for a plan that affirms to help you and your loved ones from any financial distress and live with some much needed ease.
This is a partnered post.
* Individual Claims Settlement Ratio for FY 2019-2020
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