Buy term insurance before the premiums rise!
The covid-19 pandemic changed the world completely, affecting the lives of several individuals. The need for financial backup and sound stability increased among individuals after they witnessed the effects of a pandemic. It led people into building a retirement corpus, an emergency fund, and also buy life insurance if they did not have one already. Life insurance ensures an individual that in their absence, the financial health of their loved ones would be taken care of. For buying life insurance, gone are the days that required you to pay hefty premiums all your life. Nowadays, you can choose the duration for which you want to secure your life with instruments like term insurance.
Meaning of term insurance
Term insurance is a form of pure life insurance that offers life cover for a specified tenure. It is an agreement that you come into with the insurance company when you buy a term plan. The agreement reflects that if you, as a policyholder, lose your life within the tenure of the policy, your nominee will receive the sum assured as specified. The insurance company required the policyholder to pay premiums for the life cover that they offer. While buying term insurance, you can choose the sum assured, amount of premium, and frequency of premiums as per your convenience. It is important that you choose a premium that you can easily pay throughout the duration of your policy. The term insurance age limit varies from company to company. In most cases, one can get a term plan before 65 years of age.
A term plan ensures that your loved ones have a financial backup in your absence. One of the biggest term insurance benefits is that you get a huge sum assured at low premiums. It has become the go-to option for individuals because of its pocket-friendly premiums. However, several factors have directly affected the prices of term insurance premiums and are likely to increase.
Reasons for the rise in term insurance premiums
One of the term insurance benefits that is known to everyone is the affordable premiums. However, the affordability factor was affected in the year 2021. During the Covid-19 pandemic, life insurance companies received four to five times more death claims as compared to previous years. The overall claim settlement paid by the insurance companies accounted for Rs.12948.98 crores. The sudden rise in claims affected the balance sheets of the insurance companies negatively. This led them to consider increasing their premiums.
For term insurance as well, the sudden rise in claims is the reason behind the increase in premiums. The new buyers of term insurance are likely to pay 25-40% higher premiums than the existing policyholders. The rise is reflected in both online and offline platforms. Also, there has been an increase in online purchases of term insurance as the premiums are comparatively lower than their offline counterparts.
Buy before it’s too late!
Things remain unchanged for individuals who had purchased term insurance beforehand. The amount that they had locked their premium for is the same amount they will continue to pay for the rest of the term insurance tenure. This is because insurance providers lock the premiums from the day of purchase, as mentioned in the agreement. This ensures that any premium hikes will not affect any existing policies.
For individuals who do not have a term plan and are planning or procrastinating to buy one, the timing could not be more perfect! This is because insurance companies do not hike their premiums in a go unexpectedly. Instead, they gradually do it over the long haul. As a consumer, the best thing to do right now is to buy a term insurance at the earliest and avoid paying huge premiums later. Term insurance protects your loved ones from an unexpected crisis, and it is important to ensure that you choose a sum assured that covers your dependents and liabilities. Since the term insurance age limit is 65 in most cases, it is never too late to buy one.
Term insurance ensures that in an unfortunate scenario where you lose your life, your family has enough funds to sustain their financial needs. It safeguards your family’s future in your absence. The rise in the rate of premiums is inevitable with the pandemic and the rising inflation all around the globe. When compared to other types of life insurance, irrespective of the hike in premiums, term insurance still offers a large coverage at comparatively lower premiums.