What is a Short-Term Life Insurance Policy?

Lately, short-term insurance policies have grown quite popular because of their affordability.

This insurance policy offers financial protection for a short period of time, like a year or two. It is perfect for covering immediate needs, such as short-term loans, etc.

Keep reading below to learn more about the short-term insurance policy, its importance, and the coverage benefits it offers.

What is Short-Term Life Insurance?

Short-term insurance is a type of insurance providing temporary financial coverage for a certain period of time. It can be used in any particular phase of life when required.

It is an ideal option for people who are looking for a more affordable alternative and can’t afford long-term policy.

Importance and Benefits of Short-Term Life Insurance Policies

A short-term life insurance policy can be essential to meet your short-term objectives. This life insurance policy allows you to plan for your short-term goals, serving an advantage of protecting your family in case of your demise.

Affordable Premium

This is one of the major benefits of short-term insurance, as one can get it at a lower premium. This policy doesn’t have any investment component; thus, the premium is affordable.

Policy Term

Decide the preferred duration of the policy as per your requirements and financial stability. If you want to go for a coverage below five years then then any short-term life insurance policy would be ideal for you.

Add-on Covers

With short-term insurance, you can choose if you want to supplement the policy with add-on covers or not. Some of the common add-ons are permanent disability, accidental death, and critical illness.

Quick and Easy Application Process

Many times, the application process is quite simple and quick. The hassle-free application can be completed online, and you can get the desired policy quickly.

Difference Between Short-Term and Long-Term Life Insurance

To help you gain perspective and simplify the process, here are some differences you need to know between a short-term and a long-term life insurance policy so that you can choose the insurance that is most favourable to your goals and needs.

Short-Term Life Insurance	Long-Term Life Insurance
Low premiums.	High premiums.
Offers a coverage period ranging between 1-10 years.	Offers a coverage period ranging up to 30 years or more.
Helps meet short-term financial obligations.	Helps meet comprehensive financial obligations for the long-term.
Renewable within 3-6 months after expiry.	Renewable after 2-3 years.
Provides temporary coverage.	Provides permanent coverage.

Types of Short-Term Insurance Plans

Different types of coverage provided in short-term life insurance are:

Annual Renewable Term (ART) Insurance

Annual renewable-term insurance is one of the popular short-term insurance policies which provides coverage for one year and then the option to renew it yearly at an increasing premium. It is most suitable for temporary financial purposes like short-term loan repayment.

Gadget Protection Coverage

Gadget protection coverage is a type of insurance that helps you protect your valuable electronic gadgets. These coverage plans offer a safeguard against your electronic gadgets such as smartphones, laptops, etc in case of accidental damage, theft, or liquid spills. This coverage usually lasts for a period till your device is under warranty or you can even select a specific period.

Travel Insurance

Travel insurance protects you every time you plan a trip. At times, there are several uncertainties when you travel abroad for the first time and have yet to learn. Taking travel insurance gets you covered against uncertain events that can cause huge losses in the absence of travel insurance.

Critical Illness Insurance

Critical illness insurance is short-term life insurance with a coverage period of 1-3 years. In case you are diagnosed with a heart attack, brain stroke, cancer, or organ failure, having critical illness insurance ensures that you are provided with a lump sum amount as a payout in such a circumstance.

When to Purchase a Short-Term Life Insurance Policy?

Consider getting a short-term life insurance policy if:

If you are undergoing significant changes in your lifestyle or physical health.
Protection for short-term liabilities.
If you are near your retirement period and need some financial stability.
You are over 60, and your previous insurance is about to end.

Things to Keep in Mind When Purchasing Short-Term Life Insurance

Here are a few aspects to consider before purchasing short-term life insurance:

Short-term life insurance isn’t a replacement for long-term life insurance as it provides limited coverage and temporary protection.
Sometimes, the renewable premiums increase exponentially with each renewal.

Short insurance policies also don’t provide any investment growth as they are for a brief period.

Short-term life insurance policies offer a cost-effective solution for people seeking a temporary solution. With this insurance policy, the buyer does not have to restrict their money for a longer term; instead, they have a versatile choice to suit their needs.

FAQs on Short-Term Life Insurance Policy

What is a short-term policy?

A short-term policy is a term policy that lasts for a specific brief period of time.

What is the shortest term for short-term policy?

One year or less is the shortest term for a short-term policy. Although mostly all policies under 10 years are considered short-term policies.

Is short-term policy better for retirement purposes?

A short-term policy is better for a brief duration and would not be ideal for retirement purposes as it provides no cash value growth or investment. However, if your retirement is close, you can buy short-term life insurance for financial stability.

Are there any alternatives to short-term life insurance policies?

The long-term insurance policies are an alternative of short-term policies and they are preferred by many people.

How did COVID-19 impact short-term life insurance policies?

After COVID-19 hit, people became more conscious about their health. So, people who are not able to afford long-term insurance policies, they opt for short-term ones with a more affordable premium.