Term insurance is the simplest form of insurance. Once you choose an insurer, you state your requirement in terms of how much money you want as sum assured. This sum will be paid to the beneficiary (either your spouse or your child or anybody else whom you have designated to receive the proceeds) in case of death during the term of the policy.

The period for which a term insurance policy covers you is generally 20 to 30 years. The premium to be paid depends upon the age of the assured, his annual income, the sum assured under the policy and medical condition and background of the assured. The premium is smaller as compared to the endowment life insurance policies as term insurance doesn’t confer any benefit at the end of the policy term. If you are still alive at the end of the policy term, the policy expires without you getting any money out of it.

Why should you buy term insurance if you are not getting any returns as in endowment life insurance policies? The following reasons will convince you to make up your mind for the same:

• Term life insurance is insurance in its purest form. It covers the risk for the life of the assured and guarantees lump sum payment to the family members in case of death of assured.
• This becomes a very useful insurance policy especially when the assured i.e. you are the sole bread earner for your family. You have the satisfaction of securing the financial future of your family in case of any untoward eventuality like death.
• The amount of the premiums is very less as there are no other benefits involved. This makes term insurance policies attractive to people in the lower to the middle-income bracket. They can secure the lives of their loved ones at relatively lower costs.
• If you belong to the higher income group and are a sophisticated investor, you might not be looking at insurance as a conservative savings and wealth creation tool. You might already be exploring other aggressive investments like capital market-linked instruments. Term insurance, here, secures the future of your family at lower premiums and you can invest the balance in other investment options.
• If you have taken a loan or incurred any other substantial liability, buying term insurance is a wise choice because, in case of your death, your family won’t be burdened with repaying that liability. Sum assured received under term insurance will take care of that.
• The earlier you buy term insurance; the lower would be the payment towards premium as young people have longer and healthier lifespans. This assures that you can buy a policy for bigger amount while still restricting what you pay as premiums.