One would imagine insurance as a very modern concept, something that was devised fairly recently with the evolution of currency and economic systems. Oddly, the concept of insurance has deep-rooted connections in India. There are mentions of it in the Maunsmriti, Kautilya and Yagnavalkya. Of course, there is no direct connection with the modern version of it but the base concept is the same as the one we have today.
The writings and findings show that there was the direction given that during times of natural calamities such as flood, fire and famine, there would be pooling in of resources that were to be redistributed to everyone during this time. So yes, it may not have the exact workings of modern insurances but the DNA of the concept is the same – to protect and help during tough times!
In the modern-day, of course, the concept in India has been borrowed from Western sources. It is closely linked with the rise of the Industrial Revolution and it made its way into India via the British. It started around 1818 with the introduction of the life insurance business in India. That was the year the Oriental Life Insurance Company was established in Calcutta. Sadly, it did not last too long.
However, that was just a blip in the radar – by 1938 there were 176 insurance companies in India. In 1956, the Life Insurance Corporation of India was established to provide insurance to all Indians. By 1972, the General Insurance Business (Nationalisation) Act was passed. This was to nationalise all general insurance companies in India. The landmark year is 1999 when the Malhotra Committee recommended the private sector from entering the insurance business sector.
There are multiple types of insurance – Life, motor, health, travel, property and more! From this, life insurance is the most important one. It is the insurance that we rely on the most in difficult times.
So what is Term Insurance? Well, it is one of the oldest and simplest forms of assurances where there is the payment of the sum assured on death within the tenure or term of the policy. There is also the flip side of it where if the person survives the end of the term, nothing is payable till there is a renewal. The workings of term insurance are pretty straightforward, it is an expenditure where premiums are paid. There are no direct benefits, unlike life insurance where you can apply for tax benefits and get tax-free benefits to the beneficiary. The benefits are visible only when there is an occurrence. Hence, it is an investment that is risk-based and is comparable to the purchase of a property or a car where premiums are paid year on year.
There are no visible benefits for term insurances as the premium amounts are used to cover the cost of the insurance. Unlike endowment plans, no paid-up value is accrued. So there is no question of receiving a sum when discontinued at a point. Hence, these policies are not part of the profits earned by the insurer.
So how does the Term Insurance work exactly? Let’s look at these in detail:
- Once a customer heads to an agent or a site, he/she gets to choose between an array of plans and has to decide the policy term and the coverage amount that works best for them. Once, the plan is selected, he/she gets to know the premium amount (which is calculated on health, age, term etc.)
- The premium generally stays more or less stable throughout the term of the policy. It can be paid at once or regular intervals depending on one’s requirement. There is an option as to how the coverage can be received.
- In an unfortunate case of demise, the company pays the coverage amount to the beneficiary however if the holder is alive beyond the end of the term of the coverage, he/she receives no amount unless there is a survival benefit clause activated where he/she stands to receive a lump sum at the end of the coverage period.
- Once the policy is over, there is an option to renew it. This option of renewal is allowed only till a certain age and the amount of the renewal is recalculated again for the new term.
Despite what may seem as not very beneficial, term insurance has multiple benefits and due to this more and more people are investing in it. One of the biggest reasons is the fact that the premiums are extremely low as it covers only death and nothing else. Along with that, the coverage provided has no particular limits as such. The plans can go on for more than 35 years which helps people get coverage till they are old.
The term insurance may seem not needed but it has been created to help individuals who are at highest risk. For example, if you are the only breadwinner in the family or some members are financially dependent on you. Now, nobody lives on forever and it is difficult to determine when exactly our time on the planet ends. However, with term insurance, you can guarantee no financial misfortune to loved ones once you are gone.
There are not many investment or insurance plans that can stack up against term insurance provide high coverage with low premiums which can take care. Be sure to always choose plans that are flexible, customisable along with discounts on the premium. The plan coverage should be comprehensive by itself and along with the riders. Most importantly, the claim process should be simple so that the correct amounts are received with ease.
So, if you have not yet invested, now is the best time to invest in a Term Insurance. Check out high-value policies from Bimakaro. Get the best coverage now, visit https://bimakaro.in/