Introduction
Choosing an insurance plan can be a way of securing your life, health, or property. When comparing short-term vs. long-term insurance, it’s important to understand the benefits of each. You have an assured sum for every policy coverage you choose, whether it’s a life insurance plan, a term insurance plan, or a medical insurance plan.
However, you must dispense premium subscriptions according to your term plan with the insurance service provider. You might choose to pay your premiums once every month or tender subscription payouts quarterly, half-yearly, or annually.
In this parlance, would you like to shell out premiums for a short-term insurance plan or a long-term insurance plan? Let us unveil the key points of differences covering short-term vs long-term insurance. Helping you get started here.
What is a short-term insurance plan?
A short-term insurance plan is a plan wherein you choose an insurance policy over a shorter period. This can be a health insurance coverage or a term life insurance policy that you would want to choose.
A short-term insurance plan ranges between 3 years to 10 years. You may receive interest earnings from your policy amount during the lock-in period. This way, you get monthly earnings for the money deposited by you.
And the interest earnings are done in the form of regular coupon payouts and the interest amount doubles up as a source of passive income for officegoers.
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What is a long-term insurance plan
A long-term insurance plan is an insurance plan wherein the policy is spread over a longer duration of time. The term period starts for 10 years and above.
The premium subscriptions are calculated based on the number of years you park your insurance amount with the insurance service provider. Therefore, premium amounts can be lesser as they are spread over a longer duration of time.
Whole-term life insurance, universal medical coverage plans, and universal life insurance are examples of long-term policies you can think of.
Short term vs long term insurance- Key differences covered
These are the key differences covering short-term vs long-term insurance plans. Helping you get started here:
1. Duration
Short-term insurance plans allow coverage for a specific contingency. It can be to cover hospitalization of an ongoing medical trauma. Therefore, a short-term insurance plan lasts a few months to a few years depending on how you can get your financial objectives met over a shorter period.
Whereas, in the case of a long-term insurance plan, the focus is to achieve longer-term financial goals. It can be in lieu of retirement planning or arranging for pension funds. Therefore, the lock-in period for the policy starts at 10 years and above.
2. Purpose of plans
For a short-term insurance plan, the purpose is to accommodate travel, transitional living or to cover short-term health problems on the whole.
Thus, the purpose of long-term insurance is to cover a longer-term contingency plan like life insurance, or disability insurance or to cover a long-term or comprehensive health insurance plan covering you and your family members.
3. Premium coverage
Concerning premium coverage, short-term insurance plans have higher costs and fewer deductions. This is because the sum assurance amount would be divided by the insurance policy term to arrive at premium value computation.
With respect to premium subscription money that gets dispensed for a long-term insurance plan, This is because the total sum assurance money is divided by a longer number of years to arrive at monthly or quarterly premium computation. Therefore, premium amounts are spread over a longer duration of time therefore you benefit from more affordable premium subscriptions here.
4. Tax waivers
Concerning short-term insurance plans, you cannot expect better tax waivers or tax deductions as the term of the policy covers a shorter period.
Whereas, concerning long-term insurance plans, you can expect more amount of tax deductions or tax waivers as the policy period is spread over a longer period of time. Therefore, an insurance subscription acts as a tax-saving umbrella amongst insurance subscribers on the whole.
5. Flexibility
Short-term insurance plans are more flexible in nature. As these are typically short-term plans lasting a few months to a few years, you can cancel the plans as needed. These plans are tailor-made solutions to meet the fluctuating demands of investors.
On the other hand, long-term insurance plans are usually less flexible in nature. Therefore, insurance companies allow insurance subscribers to remain a little more dedicated and committed to the coverage.
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The Bottom Line
Choosing between long-term and short-term insurance plans depends on the financial requirements you have on hand. To mitigate a shorter contingency, you would opt for a shorter-term insurance plan while a long-term insurance plan is ideally chosen to contemplate longer-term financial goals like life insurance or pension planning.
What are your thoughts on this? Do let us know in the comments below!
Frequently Asked Questions
Q1. How does an insurer cover pre-existing illnesses?
Answer: An insurance service provider might have a medical examination with you and ask you to fill out questionnaires as to whether you suffer from diseases like diabetes, high blood pressure, or hypertension. Therefore, your pre-existing illnesses are taken into account while a medical or health coverage policy is curated.
Q2. Are premium subscription expenses higher for senior citizens?
Answer: Yes, premiums for health coverage might be higher for senior citizens as they may get hospitalized or take medical treatments far more often than healthier or younger individuals.
Q3. How do you extend or renew your insurance policy?
Answer: You can contact the helpline number of the insurance service provider if you want to contact the customer care executive or your relationship manager over a phone call.
Select the Contact Us option on the website of the insurance firm to inform customer care that you want to be contacted over the telephone or so.
Q4. What is the waiting period to allow diagnosis and claim the insurance limit or coverage amount from a wellness center?
Answer: The waiting period is 24-48 hours for the insurance company to look into the claim amounts, check whether the policy covers that level of insurance coverage, and then credit the amount as the claim is made by the insurance subscriber in lieu of cashless hospitalization.
