Life may be great for the most part, but at some point, uncertainties and unexpected events may happen. They may be sudden job losses, pay cuts, or even accidents. And almost always, such incidents come with financial difficulties. This is particularly true when there is sudden demise of the primary breadwinner in a family. Loss of the primary source of income can prevent the surviving members of a family from achieving their life goals as planned. In situations like these, a term insurance plan can be the saving grace that is needed.
Let us take a closer look at what this financial product is.
What is term insurance?
Term insurance is a type of life insurance where the insurance company offers the insured person a pure life cover. In exchange for this life cover, the insured person pays term insurance premium to the insurer. As is evident from the name, the cover provided by a term insurance plan is valid for a specified period of time. This is known as the term of the policy.
If the insured person passes away during the term of the policy, the insurer pays a death benefit to the nominees or the legal heirs of the insured person. Term insurance plans are purely protective life covers, meaning that if the insured person survives the term of the policy, the insurer is not liable to pay any amount to the insured person.
Since term insurance plans offer a pure life cover, they are typically much less expensive than traditional life insurance policies like endowment plans and whole life insurance.
What is Single premium term insurance?
As the name itself makes it clear, a single premium term insurance plan is a type of term insurance where the policyholder is required to make a one-time premium only once, up front, in exchange for a life cover from the insurance company. The primary feature of this type of term insurance is that it eliminates the need to pay regular and periodic premium payments, while still allowing the insured person to enjoy a life cover.
Benefits of a single premium term plan
• No chances of policy lapses
With a single premium term plan, policyholders do not need to keep track of regular due dates for paying the premium periodically. This eliminates the chances of policy lapses, since there are no chances of any term insurance premium payments being missed.
• Suitable for people with irregular incomes
Single premium term insurance plans are preferred by people with irregular incomes, like self-employed people or entrepreneurs, since they can simply purchase the policy and relax without worrying about the policy lapsing.
• Good for people with a lump sum amount
In case someone looking to buy term insurance possesses a lump sum amount owing to a bonus or an inheritance, a single premium term plan can be the a preferred kind of life cover to purchase. It helps put that money to good use.