What Is the Waiting Period for Term Insurance?
If you are looking to financially protect the future of your loved ones, then the best way to do it is to opt for a term insurance policy. If you pay regular premiums as mentioned in the contract, the insurer is legally under contract to provide a financial pay-out to your nominated loved ones in the event of your demise. If one is not sure about the premiums quoted by the insurer, they can take the help of a term plan premium calculator. Now, after you buy the term insurance policy, your coverage may take a while to begin. The period between the purchase of the policy and the beginning of the coverage is referred to as the waiting period.
Want to know more about the waiting period in term insurance? Read on.
What is term insurance?
It is important to get a clear comprehension of term insurance before one dives into the specifics of the waiting period. As mentioned earlier, it provides a financial pay-out, also known as the sum assured, to the family members of the policyholder in case he/she passes away due to an unfortunate event. Term insurance differs primarily from other life insurance products due to its limited term coverage. It is available for a specific tenure only. The tenure may be 30 years, 40 years, or even 55 years.
Nowadays, one even has the option to buy an online term plan that requires paying no visit to the insurance branch. Though the concept of term insurance is universally the same, the terms, conditions, and features provided may differ depending on the insurer. It is important to choose the right kind of insurer to ensure a smooth insurance experience. One aspect that differs across insurers is the waiting period.
Understanding the waiting period
As mentioned earlier, the waiting period refers to the duration of time after the issuance of the policy and the commencement of the coverage of the term plan.
During this period, if any unfortunate eventuality as covered by the term insurance plan were to strike the policyholder, the insurer may withhold the sum assured. The waiting period is always mentioned in the term insurance policy document. It could be two years, one year, or maybe a few months. Sometimes, depending on the kind of term plan, the compensation may be made even during the waiting period in the case of a tragic event. However, it may be highly dependent on the number of times of, and the amount of, premium paid until then. In some cases, the family may get the cumulative paid premium returned. A term plan premium calculator can help you understand how much premium you would be paying after the issuance of the policy for your chosen sum assured.
The waiting period is not to be confused with the free look period or the survival period.
Free look period – It refers to a duration of a week or two after the purchase of the policy within which the policyholder can return it to the insurer if they are not satisfied with it. The insurer will also return the premiums, if any were paid, after carrying out the calculations.
Survival period – This kind of period is specific to the critical illness benefit rider. In this scenario, if the insurer is diagnosed with a particular illness, they have to survive the illness for a particular number of days to be eligible to receive the CI benefit pay-out. This is the survival period. There may be separate survival periods for certain diseases.
Whether one wants to buy an online term plan or an offline one, it is advisable to opt for a policy that has a short waiting period and survival period. However, this should not be the only factor to be considered. Other factors to look for include:
The benefits of the term plan
You should check if the insurer offers attractive returns on the return to premium feature of their term policies.
Claim settlement ratio (CSR)
The CSR of the insurer is an indication of how dedicated the company is when it comes to settling policyholders’ claims. The higher the CSR, the better it is for you.
The customer service of the insurer
How well the insurer treats its customers and how responsive it is to their complaints are also vital aspects to be considered.
Now that you’ve absorbed everything that’s said above, note that it is not enough to only know the answer to ‘What is term insurance?’ or ‘What is the waiting period?’. One should also know how to select the right term plan with an appropriate waiting period.