What exactly is term insurance?
Term life insurance covers a set timeframe. The beneficiary receives the death benefit if the insured passes away during the insurance period. In addition, because term insurance plans have no cash value, they are significantly less expensive than permanent life insurance policies during the initial periods. But, through a term life insurance (pure life cover), the only value is the beneficiary’s guaranteed death benefit. In contrast, other life insurance plans, also known as endowment plans, include an additional savings component.
Thus, term insurance is essential and economical. This lets policyholders get more life insurance for less than endowment policies. Many term policies have level premiums, but others offer increasing or diminishing benefits and the ability to convert the term policy into a permanent insurance plan.
Types of Policies for Term Insurance
Policyholders can choose alternative term policies based on their needs rather than level terms.
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Interchangeable Term
Convertible term plans permit policyholders to convert their term life insurance policy, which may have a few years left before expiration, into a permanent plan.
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Expanding Term
After a certain period, few policies allow policyholders to increase the death benefit. While this increases the premium, policyholders can initially pay lower premiums.
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Term or Mortgage Reduction
A declining term (mortgage term) policy diminishes coverage at a predetermined rate. Monthly or annual coverage reductions and constant rates (lower than term insurance) are typical.
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Annual Renewing Programs
In contrast to term insurance tax benefits on term policies, which are renewed annually with higher premiums, annual renewable term plans guarantee coverage approval yearly. Nevertheless, these plans can be cost-effective for some policyholders, with costs rising over time.
What is a Rider?
Riders for term insurance are amendments or attachments to a term insurance policy that provide the policyholder with additional coverage, thereby enhancing the utility of the policy. Riders supplement term insurance’s death benefit.
Rider prices and conditions vary by policy, premium, and insurer. Some term insurance plans offer riders, while others require consumers to pay extra.
Typically, the premiums paid for riders are less than those paid for term insurance policies, and the sum assured for term riders is also less than the insurance cover.
*Standard T&C Apply
Types of Riders in Policies for Term Insurance
Six crucial riders provide policyholders with additional benefits when purchasing term insurance.
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Unintentional Death Rider
In the event of an accident, the insured passes away. In that situation, this rider pays an additional sum assured to the beneficiary based on the term plan sum assured. The accidental death rider’s maximum sum assured may be capped, and the additional percentage may vary by firm. However, the premium stays the same. The beneficiary will get the term plan’s death benefit if the insured ceases to exist other than in an accident.
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Critical Illness Rider
Critical illness riders protect policyholders from costly conditions like cancer, heart attack, kidney failure, and paralysis. These riders provide lump-sum payments to policyholders with pre-specified medical conditions. Thus, the policyholder must study the policy and understand the rider’s illnesses.
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Accelerated Life Insurance Rider
Suppose the policyholder chooses theterm riderand has been diagnosed with a terminal illness. In that case, the accelerated death benefit rider allows their family to receive a portion of the death benefit in advance, which can be used to pay for medical expenses. This low-cost rider specifies the percentage of the sum assured that would be paid in advance, with the remainder going to the beneficiary upon the policyholder’s demise.
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Accidental Disability Benefit Rider
The disability benefit rider prevents accident-related disability. Most policies reimburse disabled policyholders a percentage of the money assured for five to 10 years after an accident. Thus, these riders provide money for the individual and family. This rider only activates if the policyholder is disabled in an accident.
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Revocation of Premium Rider
This rider is helpful if the policyholder cannot pay premiums due to disability or loss of income. This rider keeps the term life insurance active while waiving future premium payments. Without the rider, if the insured cannot pay premiums due to a loss of income or a disability, the policy expires, and the beneficiary receives no death benefit.
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Income Benefit Supplement
This rider is intended to generate income after the policyholder’s demise. With the addition of this rider to the insurance plan, the policyholder’s family will receive additional income each year for five to ten years after the insured’s passing away, in addition to the term plan’s sum insured.
Term insurance tax benefitshave gained popularity due to their affordability of the plans and lower premiums compared to other types of life insurance. Riders allow policyholders to safeguard the futures of their family members in the event of a misfortune resulting in a partial or permanent disability or another unforeseen event.
So what are you waiting for? Stay protected with term insurance!
