When it comes to life insurance, many people think of long-term commitments requiring regular premium payments. However, not everyone needs or can afford such commitments. Short-term life insurance is a viable option for those who need temporary coverage. This comprehensive guide will discuss everything you need to know about short-term life insurance in India.
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As the name suggests, short-term life insurance provides coverage for a limited period. Typically, the coverage period ranges from one to 10 years. Unlike long-term life insurance, short-term life insurance does not accumulate cash value or have a savings component. It is a pure protection plan that pays a death benefit to the nominees if the insured member passes away during the coverage period.
Here are the features and benefits of short-term life insurance.
One of the top benefits of buying a Short-Term Policy is that you can avail of it at a lower premium. Since it has no investment component attached, the policies are comparatively available at lower premiums. However, the premium will depend on the policy period and the sum assured.
You can choose to supplement your policy with add-on covers. Common add-ons include permanent disability, critical illness, and accidental death. For some additional premiums, you can get the following coverages:
You receive a lump-sum amount upon the detection of critical diseases covered under the plan.
These offer a fixed amount if the insured is permanently disabled due to an accident.
In case of untimely death due to an accident, extra payouts, alongside the basic policy death benefit, are provided to your beneficiaries.
Under Section 80C, Income Tax Act, 1961, premiums paid towards a short-term life insurance policy are qualified for deduction from your taxable income. Moreover, the death benefits paid to the policyholder's beneficiary will not be taxable under Section 10(10D) of the Income Tax Act 1961.
If you surrender the policy before the maturity period, you can avail of the surrender benefit for a short-term life insurance policy.
Note: Tax benefits on Life Insurance plans are available under the Old Tax Regime. However, if you opt for the New Tax Regime to pay income tax, any payouts above Rs. 5 lakhs will be taxable for policies purchased after April 2023.
Here are some factors that you should consider when buying a short-term life insurance policy for yourself or your loved ones.
Decide your preferred period for which you want to take insurance and choose the plan accordingly, whether long-term or short-term. If you want a policy below five years, go for a short-term policy.
How much coverage do you need? If you need small or medium coverage for a short duration, go for a short-term policy. The premium will be lower and serve you well in the short term.
How often are you comfortable paying the premium, and for how long? It will decide the policy you take up. If you want to pay low premiums for a short period, go for a short-term policy.
Evaluate your life stage when planning to buy Life Insurance. Your age, financial situation, marital status, etc., form the basis for choosing the policy duration, the amount of life coverage, and, therefore, the policy itself. If you are your family's sole provider, they may depend on you.
Your lifestyle dramatically affects your choice of insurance. Your spending habits and standard of living determine the extent of your future expenses. If you can make this assessment correctly, you can effectively secure your family's future. When you have a clear lifestyle picture, you can financially safeguard your loved ones more efficiently.
It is essential to consider your income while opting for a policy. It would be best if you were aware of all your financial commitments and your various sources of income. Opting for a massive policy amount does not make sense if you cannot pay high premiums. If you do not calculate this correctly, you may end up with small insurance coverage or with high premiums to pay that you cannot afford.
Your current financial obligations and liabilities are essential factors in determining your term insurance. If you have loans to be paid in the long term and your policy cannot cover them, it can be financially stressful for your loved ones. Therefore, it is necessary to consider your debts while deciding on the policy.
The Claim Settlement Ratio is the percentage of claims settled by an insurer versus the total number of claims received in a financial year. It gives you an idea about the insurer's capacity and objective to abide by its end of the insurance agreement. Deciding on an insurer and policy that will benefit you and your family the most is helpful.
Here are ways in which you can buy life insurance in India.
Navigate to the webpage of an insurer of your choice. Register or log in to your account. Compare the different short-term policies on offer. Choose the one that suits your requirements and proceed to click on buy. Fill out the necessary details in the insurance form and make the payment. Your purchase is complete, and you will receive your policy details by email.
Visit the insurer's office and talk to an insurance advisor. If you already know one, you can ask them to meet you. Tell them about your requirements and that you wish to buy a short-term insurance policy. After careful consideration, finalise the policy. Please give them the forms with complete details and signatures and make the payment. Your policy documents will be sent to you by email or postal service.
You may need the following documents to buy short-term insurance in India.
Note: The documents mentioned above are indicative and may differ from the ones your insurer may request.
It would help if you considered buying a short-term insurance policy in the following events:
Remember that a short-term policy cannot meet your family's day-to-day expenses but is only covered in an emergency. It can be used only as supplementary financial protection and not as the sole source of income.
Short-term life insurance is an ideal choice for those who need temporary coverage. It is especially useful for individuals who have short-term financial obligations or liabilities to protect their families against in case of their sudden demise.
For example, if you have a home loan or a car loan, you can opt for short-term life insurance to ensure that your family is not burdened with the repayment in case of your untimely death.
Short-term life insurance is also more affordable than long-term life insurance. The coverage period is shorter, and the premiums are lower, making it an attractive option for those on a tight budget.
Term insurance is a vital and affordable financial product that offers comprehensive coverage to safeguard your family's future. It is a smart financial decision for long-term planning and provides peace of mind. Term plans are a form of life insurance that also offers tax benefits.
Purchasing a ₹1 crore term insurance policy is a straightforward and smart way to secure your family. It offers substantial coverage at an affordable cost, ensuring your loved one's financial stability. While deciding on a term, you can estimate the right coverage amount and premiums using a term insurance calculator to find a plan that fits your age, income, and financial goals.
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.
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