Paradise Often Evicts Plebeians

Outlook Money|June 2020

Paradise Often Evicts Plebeians
Certain types of mortality rates are excluded by term insurance plans
Aparajita Gupta

Owning responsibilities of family members is very crucial in life, which one has to ensure during one’s very lifetime. That is the space where term insurance plays a decisive role. However, people are often ignorant of the kinds of deaths term insurance does not cover under its purview.

Term insurance plans are bought to take care of family members during the policy owner’s death or in the unfortunate incident of permanent disability.

Not all kind of deaths are covered under term plans, there are certain exclusions, which could lead to claim rejection and one must read it carefully before buying the policy.

Popularity of term insurance continues to be relative. While it has gained some popularity in the last five years or so, yet penetration is only about 24 per cent for the urban markets.

Sharing her views on this very trend, Gayathri Parthasarathy, National Head, Financial Services, KPMG in India, says that term insurance in India has an extremely small market and constitutes ~5 per cent of the new business premium in the retail segment. The penetration of term insurance is extremely low owing to lesser awareness levels. Term plan stems from the original concept of life insurance where one pays a premium to safeguard income for dependents in case of death.

This type of insurance plan is availed by both service people and business persons alike. “Service people or professionals take this as this is the cheapest insurance and also most flexible; where people are moving cities or countries during their work, term plan becomes flexible and not a burden,” says Shweta Jain, CEO and Founder, Investography.

Term insurance assures a family financial protection after sudden death. However, there can be circumstances where if something unfortunate happens to you or you suffer from any critical illness, which results in huge financial loss. Under such situations, your insurance rider comes in.

“One should always look for riders while buying a term plan. Riders are basically add-ons to your basic term policy and work as a tool to boost your insurance coverage without having to buy a separate policy altogether. However, one does not need to buy all the riders because as a policyholder, it is very important for you to choose the right riders that make sense for you,” says Santosh Agarwal, Chief Business Officer, Life Insurance, Policybazaar.

In case of death due to an accident, the sum assured of the accidental death rider is payable in addition to the normal term insurance death benefit.

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June 2020