Term insurance: Expanding risk cover
Term insurance is pure life insurance, where there is no savings or investment component. In the most common type of term insurance, there is nothing that the policyholder gets on survival. Effectively, term insurance provides life cover for defined period of time, and if the insured expires during the term of the policy then death benefit is payable to nominee. The coverage is fixed and so is the tenure for which the policy is offered.
The rising popularity of term insurance is to do with the fact that these have among the lowest of premiums among all the types of life insurance policies. The premiums are low because there is no investment component and the entire premium goes for covering the risk of life. What it means is that there is no survival or maturity benefit once the policy term expires
One way to further extract value from term plans is by adding an accident disability cover to it. Permanent and Partial Disability riders are useful to add to a term plan to not only increase the scope of cover, but also because these are cost efficient. Moreover, in case of disability due to an accident, the policy pays out a fixed sum for a fixed number of years depending on the policy terms and conditions. This accident rider provides you with income in such cases, where the accident leads to disability, which could be total or partial and temporary or permanent. If the rider looks expensive or you do not wish to mix it with the term plan, you could also take a disability cover on a standalone basis. Do not ignore a term plan at any stage in your life, and when you are young, do add an accident cover, for accidents do not occur with a notice.