What Is Term Plan, What Is Term Insurance, What Is Term Insurance Policy
Term Insurance is the most economical way of ensuring that your family’s standard of living is maintained even in your absence. It is a type of life insurance that provides coverage for a certain period of time or years. You pay a nominal premium every year to buy a life insurance cover, and in case of any unfortunate death during this time, your family is paid the amount promised to you by your insurer. Generally, no survival benefits are payable for a term plan. The premium you pay is tax exempt and the benefit that is paid to your family is completely tax free.
How to choose the best Term plan?
A trusted brand, since you will be associated for 35-40 years with the brand
Check the claim settlement ratio, Go with the insurer who has a claim paid ratio of >95% for the past 3 years. For a Term Plan, claim payment is the moment of truth.
Comprehensive and flexible cover so that your family is protected financially not just against death but also against Critical Illness and Disability.
Affordable premiums. Term plans are the cheapest form of life insurance. If you want an option that is light on the pocket, opt for monthly frequency of paying premium
Compare the terms and conditions of various insurance companies
Some of the key features that make term plans indispensable include
1. Larger life cover
Since term life insurance plans are more affordable it is possible for an individual to opt for a higher life cover for the same premium as an endowment plan. For e.g. a 30-year old can get a term plan with a cover of Rs 1 crore for a 30-year term by paying a premium .
The Rs 1 crore endowment plan will most likely out of bounds for most 30-year olds. However, taking a term plan for a similar cover is relatively more feasible.
The policyholder can attach riders to the term plan, thereby enhancing the utility of the policy. So by opting for a critical illness rider or a critical illness plan, for instance, he is entitled to receive the sum assured on being diagnosed with the critical illness. This is in addition to the death benefit of an equal amount on death over the term of the policy. There are other riders to choose from like – loss of employment cover,disability cover, waiver of premium cover, among others. The policyholder should select riders based on his specific needs to make the life cover more suitable and meaningful.
3. Enhanced cover
Certain insurance companies offer the flexibility to enhance the life cover during critical stages of the policyholder’s life. For instance, the policyholdermay be permitted to enhance life cover by 50% at the time of marriage and by 25% at the time of turning a parent. This makes it possible for him to start with a modest cover and then enhanceit as responsibilities increase as also the ability to pay higher premium.
4. Innovative features
While insurance companies have been quick to innovate in general, they have been most innovative with regards term plans. For instance, companies have been quick and proactive in cutting premium rates even offering extra discounts to certain categories like non-smokers, for instance. Buying term plans is now quite convenient thanks to the internet. It is possible for a healthy individual, as defined by the insurer, to buy a term plan over the internet without taking a medical test.
Why is the premiums charged for taking a Term Insurance Policy very low?
The premiums for Term insurance policies are the lowest among all the types of life insurance policies. The premiums are low since there is no investment component and the entire premium goes for covering the risk. So if the policy holder expires during the insured term, the death benefit is paid to the nominee. There is no survival or maturity benefit once the policy term expires. There may be some plans that offer to return the premiums paid by the policy holder if he survives.
Important Factor To Consider While Taking Term Insurance
Try to take Term Insurance from younger in age, premiums will be based on your age. At younger age premiums will be low, Older age premiums will increase
Plan to take two term insurance plans from two different insurance company, it will save you in case of rejection of claim from one of either two companies. For ex if you are planning to take 50 lks Term Insurance then plan to take 2 policies from different insurance policy providers