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6 Times Short Term Life Insurance is a Good Idea

Insuring the life of your loved ones is always a good idea. Be it whole or short-term life insurance, each offers a significant financial cushion to your family. In this piece of article, you can find details about short-term insurance plans.

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What is Short Term Life Insurance?

Short-term life insurance is an adequate alternative to providing financial protection to your family while you decide on a long-term insurance plan. The policy remains in effect for one year, which can be renewed each year. However, the premiums of short-term life insurance increase each year significantly.

Types of short-term life insurance policies are:

  • Annual Renewable Term (ART) offers one-year protection that can be renewed annually, increasing the premium every year. Thus, making it substantially more expensive than the traditional policies over the years. If you do not want to purchase a long-term policy, choosing ART can also serve the purpose.
  • Temporary life insurance ranging between one to three months is used to cover the intermediate period taken by an insurer to issue a full-time policy. There is usually a significant time gap between the initial application for the policy and its final effective date since the application passes through various documentary and procedural requirements. 

When Do You Need Short-Term Life Insurance?

Working out ways to save your loved ones in your absence is the real sense of accountability. In difficult times, you can call for a safety net in the form of short-term alternatives.

Here are some reasons for you to buy a short-term life insurance policy:

  1. Substantial changes in lifestyle or physical wellbeing

    The amount of premium you pay is directly related to your overall health status at a point in time. A short-term policy would fit in perfectly well for the time you are working on improving your health conditions - be it losing those extra pounds of weight or quitting smoking or alcohol. As your health improves, you can opt for a long-term policy with lower premium rates at a later stage. 

  2. Susceptibility to danger

    The premiums charged by the traditional policy insurers is also linked to the level of danger you are exposed to each day. If you are temporarily engaged in occupations like pilots, mining and factory workers, short-term plans add a layer of financial security.

    Best term Insurance Plans in India Best term Insurance Plans in India
  3. Processing long-term life insurance policy

    When you apply for a long-term life insurance policy, it usually takes around five to six weeks for it to come into effect. During this period, a short-term policy can help protect against life’s uncertainties. Once you terminate this policy, your actual long-term policy is approved and comes into force.

  4. Shield against short-term debts

    The unforeseen can take place at any time in life. Leaving your family with huge debt can potentially have an adverse impact on their lives. Ensuring your family's financial stability and lifestyle by opting for ART plans becomes a wise choice. Short term bank loans, account payables, lease payments, statutory payable dues are all examples of the same.

  5. Salaried individuals searching for a new job

    Employers usually provide life insurance policies at work. If you are planning to take a break from work for a short span or looking for better career alternatives, you can cover risks with the help of temporary or short-term policies.

  6. Other temporary needs

    Insurance needs are highly individual specific and thereby offer flexibility. Temporary needs like financial protection during the waiting period or exposure to danger can be met with short-term life insurance policies. Securing the financial needs of your dependents can be done with the help of short-term plans.

Short Term Vs Long Term Insurance Policies

Policy Feature 

Short Term Policies

Long Term Policies

Length of coverage

One Year or Less

More than a year

Premiums

Premium increase gradually

Remain the same 

Permanent Coverage 

No

Yes – for Whole Life Insurance

Accumulates Cash Value 

No

Yes – for Whole Life Insurance

Eligible for annual dividends 

No

Yes – for Whole Life Insurance

What Are the Documents Required to Buy a Short-Term Policy? 

For purchasing a short-term policy, the documents required are:

  • Proof of income – salary slips, income tax returns, bank statements, CA certificates, Form 16
  • Proof of residence – Aadhar card, voter ID, driving licence, Passport, utility bills, ration card, and passbook
  • Proof of Identity   - Passport, PAN card, Aadhar card, voter ID 
  • Proof of age - Passport, PAN card, Aadhar card, voter ID
  • Duly filled application form 
  • Self-declaration form

How To Choose Your Insurance Provider? 

Several factors are to be borne in mind while selecting the policy that suits you the best: 

  • Market reputation of the service provider:  Know about your insurance provider in detail- their financial strength, their mission, vision and goals, types of products they sell, how long they have been in this field and so on.
  • Customer reviews: The consumers are the best judges; their experiences are true and valuable. Research and find out what the ultimate consumer has to say about the products of the insurer and how good their service experience has been.
  • Evaluation of the sum assured: Select the insurance provider that provides you with the maximum coverage based on your needs and expectations.
  • Premiums: Look for discounts in the premium charged and prevailing offers to meet your financial goals alongside.
  • Claim Settlement Ratio (CSR): The claim settlement ratio is the number of claims settled by the insurance provider in proportion to the total claims received. Ensure that you choose the provider that has the highest claim settlement ratio.
  • Ease of doing business: It is important to ensure that your service provider is easily accessible at the time of need, premium payments are hassle-free, and all your questions are answered.
  • Business volume: Analysing the provider's business before trusting the same would be a wise move to go with. 
  • Full disclosure: Ensure that your insurance company provides you with all the necessary details and clears doubts about the terms and conditions of your policy.

Short-term insurance is a viable option for those who want temporary protection while researching standard term or whole life insurance. You can also buy these for an additional layer of security to life.

FAQ's

  • Q. Is short-term life insurance cost feasible?

    Ans: Although the premium for a short-term policy starts at a lower rate, the cost of short-term annually renewable policies tends to increase each year, making it relatively costlier than the standard policies in the long run. 
  • Q. Are there any alternatives to short-term life insurance? 

    Ans: The traditional long-term policies that are always available, apart from the same term life insurance policies that provide coverage for a fixed number of years, are also preferred by several people. 
  • Q. How much insurance cover do you need?

    Ans: The coverage required shall vary depending upon your age, marital status, outstanding liabilities, lifestyle, expenses, source of income and the like. 
  • Q. What is the impact of COVID-19 on short-term policies?

    Ans: The pandemic has caused havoc across the globe. If you cannot afford a long-term policy on account of the financial trauma faced, short-term policies can be used as a remedial alternative.
  • Q. Who should buy short-term policies? 

    Ans: Young individuals, single adults, new families, people with children or adult children with special needs, people having loans, senior citizens, retired persons, business owners are the ones who should opt for short-term insurance.          
  • Q. Does it prepare you for the worst? 

    Ans: It cannot cover your absence to your family but can help them maintain their current lifestyle in your absence and ensure financial stability against unanticipated events.

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