This period is generally around 20 to 30 years or longer. However, what if you have a temporary need for insurance coverage? Here is where a short-term plan can be highly relevant. Check out the details of what short term insurance plans are, and what you should know about them.
What is Short-Term Insurance?
Short term insurance, as the name indicates, is simply a term insurance cover that lasts for a shorter period of time than the duration of cover offered by regular term insurance plans. It can be as short as 1 year, or a little longer, such as 5 years. If you have any significant financial liabilities that need to be fulfilled in the near future, and if something untoward happens to you over the short term, your family may not be adequately equipped to meet these debts.
Short term insurance plans can help you protect your family from this kind of financial stress, since they offer adequate coverage for such requirements. If this sounds like something that you would benefit from, then it is best to know all about short term insurance before you apply for a short-term cover. Check out the key details below.
Things to Know About Short-Term Insurance
There are a few essential things that you should know about short term insurance plans before you invest in them. Here are some key aspects to be aware of.
● Tax benefits
Short term insurance also offers tax benefits, just like long-term term insurance plans. The premiums you pay for your term insurance plan are eligible for deduction under section 80C of the Income Tax Act, 1961, up to Rs. 1.5 lakhs. Similarly, the death benefits offered under the plan are exempt from tax under section 10(10D) of the Income Tax Act, 1961. The above-mentioned tax benefits will be subject to the provisions mentioned in the Income Tax Act, 1961
● Affordable premiums
Short term insurance plans may be more affordable than long term covers since the premiums are lower. So, you can meet any temporary need for life insurance without taking on any additional financial burden.
● Add-on riders
Short term insurance plans also offer you the option to enhance the protection offered under the base plan with the help of add-on riders by paying nominal extra premium. You can select the rider term to be the same as the duration of the short-term insurance plan, so you can enjoy the additional cover as long as the base life cover lasts.
● Death benefits
Short term insurance coverage is primarily to give your family the advantage of death benefits in case of your demise during the policy term. If something untoward were to happen to you during the short term over which the policy is valid, the insurer will pay out the death benefits to your nominee subject to policy terms & conditions.
How to Calculate Your Term Insurance Premium?
You can make use of a term insurance calculator to check what the premium for your insurance policy will be. Here is a step-by-step guide to use the calculator.
- Enter the required personal details like your date of birth, gender, marital status, annual income, and smoking habits.
- Fill in the amount of coverage you need. This is essentially the sum assured under the plan.
- Enter other policy related features like the policy term, the premium payment term and the premium payment frequency.
That’s it! Once you enter these details, the insurance calculator will show you the amount of term insurance premium that you will have to pay.
Conclusion
This should give you a good idea of what short-term term insurance plans are all about, and how you can calculate the term insurance premium for the same. Remember that a short-term insurance plan may not give you enough long-term protection. So, always supplement your short-term insurance cover with an adequate long-term policy.
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