Short term life insurance is a type of insurance that falls under term insurance plan which provides coverage for less than a year. It’s meant to cover you for a short time period, and for a specific purpose. The main objective of short term life insurance policy is to safeguard you from the financial loss from the unforeseen incident.
The main benefit that you can get from this policy is that it is designed for high risk protection to the assured with comparatively very low premium rate than other plans. Here, some of the benefits that you get from short term life insurance are pointed out.
- Peace of mind that life insurance is in place during a brief period of your life where you may be engaged in a hazardous activity.
- Flexible terms available, from a year to term you find appropriate.
- A short term policy is the best alternative for temporary and short time frame needs.
- High risk protection with comparatively low premium rate.
- Younger clients may acquire more coverage at lower immediate cost.
- Beneficiary proceeds are not subject to federal income taxes.
- Policies can be used as collateral for loans.
Short term life insurance plan is the best plan in terms of high level of security at a lower cost. If a person has taken a loan from a bank or other financial institution and insured under this plan the liability against his loan would be borne by the related insurance company. Many of the life insurance companies in Nepal provide short term life insurance for at least 3 years to the maximum year according to company policy, but since the past few years new policy has been formulated that provide life insurance for 1 year also, but this scheme depends upon life insurance companies.
There are certain situations where a short term life insurance plan may be exactly what you need. Some people have a need for long term life insurance, while others may need short term life insurance to help with a specific need. One may have long term life insurance or not, but having a short term life insurance provides an additional layer of coverage to your existing life insurance. People mostly apply for short term life insurance for certain benefits that they can get in the short term like while traveling it can provide additional coverage, or if you may be exposed to a dangerous situation or event, or to provide coverage for a short term loan or business transactions. Short term life insurance policy holders also enjoy tax free payment. The short term life insurance is risk free, may have lower interest but have low premium payment and have few benefits that are seeked by those people who are in need of fulfilling certain things or being aware of certain situations in a shorter amount of time.
There are times where long term life insurance can be beneficial and times where short term life insurance can be beneficial, it depends how you use those insurance and for what purpose you will use it. Both insurance plans have their own advantages and disadvantages.