Do You Know Why Do You Need To Buy A Term Plan?
Every household should buy a comprehensive term insurance plan to fulfill its financial needs. The smartest way to buy anything is to compare features and prices with its counterparts from other companies. Similarly, you should access and compare reliable information about various life insurance products, so that you can determine the best fit for your family.
The life insurance policy will compensate the family in case of the policyholder’s death, which is especially important when the policyholder is also the sole breadwinner of the family. Thus, if you have dependents such as children, spouse and/or parents, you should buy an insurance policy. By choosing the best policy, you can efficiently manage the risk.
Term insurance plan
A term insurance plan offers life cover for a specific sum and for a specific tenure. If the policyholder dies during the term, the life insurance company will pay a death benefit. The death benefit will be paid to the beneficiary or nominee. Generally, policyholders choose their children or spouse as the nominee.
Thus, insurance is important for important for each and every individual.
Benefits of term insurance plan
- Low premium – A term insurance plan can be subscribed to at a very low premium cost. You can buy term insurance plans which offer covers of Rs. 25 lakhs up to Rs. 1 crore.
- Customization of payouts – The payouts can be customized as per your needs. You can go for a basic cover that either provides a lump sum payout or monthly payouts. Alternatively, it is also possible to opt for lump sum payout combined with a monthly income.
- Duration – A term insurance plan will cover many years. You can opt for a plan with a duration ranging from 5 years to 50 years without any issues.
- Premium payment mode – There are insurance plans with single premium payment mode as well as regular premium payment mode. If you have access to sufficient funds, you can opt for a single premium payment. On the other hand, the regular premium payment option is feasible for employees. The premium will be deducted from your monthly salary if you opt for a monthly mode. A mandate form can be submitted to your employer so that the premium will be deducted from your account and directly credited to your policy without any issues. You can also subscribe to quarterly, semi-annual and annual premium payment mode, as per your convenience. If you opt for an annual payment of premium, the insurance company will give a saving on the insurance premium.
- Waiver of future premiums – This attractive rider is often built into most term plans. You may know that when your premium payment is not made before a stipulated date, your policy will lapse. However, there may be some unavoidable circumstances, due to which you may fail to contribute to the policy. Thus, the premium waiver rider lets you avail the benefits of your investment. This benefit is provided in case the policyholder is diagnosed with some serious illnesses or disability.
- Exemption from income tax – The term plan is great because they reduce your tax burden. The premium contributed to the insurance plan is exempted from income tax under Section 80C of the Income Tax Act. Furthermore, the maturity proceeds are exempted from Income Tax under Section 10 (10D).
- Lower premium for non-smokers – Insurance companies assess the risks associated with the individual and the premium is determined based on the risk perception. For non-smokers, insurance companies offer special saving so that you can make the most of your money.
- Provides supplementary income – In case of the sudden death of the policyholder, the term insurance plan can provide a supplementary income to the family. The loss of income due to disability or a terminal illness will also be compensated with the plan.
Features of a term insurance plan
To offer maximum financial protection to your dependents, you should carefully choose a term insurance plan. The following factors should influence your decision:
- Entry age – The minimum age for a term insurance plan is 18 years, while the maximum age for a term plan is 65 years. The later you enter the policy, the higher the premium will increase. Hence, you should buy a term policy at a young age and opt for a longer policy tenure. The premium will not change throughout the term.
- Maturity age – You should buy a term insurance policy which offers coverage for the longest period. An insurance policy with lifetime coverage is the best option. Most term plans offer a cover from 65 to 70 years.
- Survival benefits – If you subscribe to a very basic plan, it will not provide any survival benefits. With the introduction of Term Return of Premium (TROP) plans, the policyholder can opt for plans that return the paid premiums at the end of the policy tenure. If the policyholder dies during the term, the death benefit will be awarded to the beneficiary. However, the premium for TROPs is higher than the premium for standard plans.
- Death benefits – The death benefit will be awarded to the nominee or assignee as per the terms and conditions of the policy. The death benefit remains same throughout the insurance term for standard insurance plans. If you go for a decreasing plan, the death benefit will decrease towards the end of the term. There are various options in an insurance policy. The customer should choose the most appropriate options as per the future financial requirements.
- Additional riders – Various additional benefits will be offered by the insurance company such as critical illness, accidental death or disability. Some insurance companies offer an ‘accelerated sum assured’ benefit. You should choose the best life insurance plan which comes with various riders at a low premium.
Protection of family members
Term insurance plans protect the needs of dependents. Every breadwinner in a family should purchase a term insurance plan.
- Coverage of Spouse - It is very important to buy an insurance cover for dependent spouses as well. If your spouse is working as well, the spouse’s life should be covered. In the unfortunate event of your and your wife’s demise, the needs of your children and other dependents will be filled by the insurance plan.
- Coverage of professionals - Businessmen, employees, professionals and various people in responsible positions should buy one or more insurance policies to fulfill their dependents’ needs. Such policies enable families to receive a significant compensation.
- Joint life insurance - You can buy a single life or joint life insurance policy as per affordability and convenience. A joint life insurance policy is cheaper than a single life insurance policy. The features remain the same for a joint life insurance policy while also offering a low premium.
- Couples - Couples with children can subscribe for a joint life insurance plan so that their children’s future will be protected in the event of the death of both parents.
- Crucial illness - Lump sum amount will be paid in case of disability or critical illness. Hence, a term insurance policy will efficiently fulfill help you provide for any financial emergencies. There are policies which offer lump sum amount and a premium waiver benefit, if you are diagnosed with a critical illness.
Selection of the insurance company
- Customer support - You should choose an insurance company which offers a responsive and efficient customer support.
- Online operations - Most insurance companies offer insurance plans on the internet. You can buy an online insurance plan at a great saving. It is possible to pay the premium online and the policy status can be tracked very easily.
- Low premium - The best life insurance plan is one that offers an extensive cover at a low premium. You can compare insurance premiums and decide on the best policy as per your needs.
- Claim settlement ratio - This is an important factor which influences the selection of the policy. A high claim settlement ratio is a strong indicator that your claims will easily be settled.
- Riders – By applying various kinds of riders, the cover of an insurance policy can be enhanced to suit your needs.
- Group insurance plan – With a group insurance plan, you can expect a higher coverage at a low premium.
- Popular insurance companies – There are many insurance companies offering various kinds of insurance plans in India. These companies include LIC, Bajaj Allianz, HDFC Life, Max New York, Bharti Axa, Aegon Religare, AVIVA, SBI Life and other insurance companies.
As one grows older, the risk to his/her life also increases. Therefore, you should buy a suitable life insurance product as early as possible to fulfill your needs. It is very important to assess the insurance coverage offered, as then you can decide to buy additional policies to fulfill your financial needs more comprehensively. The best term plan will extensively protect the interests of your family members.