Who Should Buy the Long-Term Plans?
Long term plans are suitable for:
- Youth: Starting early in life is always the wise choice. As a young professional, you have just started working, and retirement is far away. Besides, you are entitled to a greater sum assured at lower premium rates.
- Taxpayers: Premium paid for long-term insurance plans are eligible for exemption under Section 80C of the Income Tax Act, 1961. Therefore, long term plans can provide savings on taxes and benefits of life cover.
- Newly-weds: If you wish to secure the financial stability of your spouse, especially if your spouse is a homemaker then, buying a plan that can cover your liabilities in an unprecedented situation as a safety net is a wise choice.
- New parents: As a parent, you are committed to ensuring the financial future of your children. In case of your unfortunate demise, a policy can secure the future of your dependent children.
- Sole-earner: After your demise, a policy is helpful to meet the needs of your family, especially when you are the sole earner.
- Working women: In this new era, women are independent and should look for their post-retirement years. A long-term plan can be beneficial in achieving many goals.
Salient Features of a Long Term Plan
Some of the features of a long-term plan are enumerated below:
- Cost efficiency: A long-term plan is cost-effective in comparison to a short-term plan. The premiums are low and accessible to all.
- Long-term protection: A term life cover of up to 50 years is available. You can choose the one as per your needs and desires.
- Payment convenience: A policyholder has the option to choose among the monthly, quarterly, or annual payment options depending upon the paying capacity and ease.
- Tax benefits: The premiums paid are eligible for tax benefits under Section 80C of the Income Tax Act, 1961. Thus, adding to the list of benefits provided by long-term plans.
- Ease of business: Buying a long-term policy is no longer a tedious job; the policies are readily available with various options depending upon personal preferences.
- Provision for additional rider benefits: Additional rider benefits such as Income benefit rider, accidental total and permanent disability rider, and critical illness rider are also available.
What Are the Benefits of a Long-Term Plan?
Several benefits of a long-term plan are covered underneath:
- Back up against loans and liabilities: If you do not wish to burden your dependents with the existing loans and dues against you, a long-term plan just serves the purpose.
- Greater sum assured at affordable premium rates: The most beneficial aspect of a long-term plan is that the premium rates are low, whereas the sum assured is relatively higher.
- Death benefits: On the sudden demise of the policyholder, the nominee or the entitled beneficiary receives the total death benefit as per the terms of the policy. It can be in the form of lump-sum payments and or differed annuity payments spread over your retirement years.
- Maturity benefits: Several long-term plans provide maturity benefits after the policy matures and/or if the policyholder survives the policy term.
- Survival benefits: A standard policy does not have any survival benefits. However, various companies have now come up with plans that support survival benefits as well.
How to Select the Correct Plan For Your Life?
You can keep the following points in mind while selecting the most suitable plan for you:
- Acquire complete knowledge of the available plans and policies, understand their terms and conditions. Compare their sum assured, premium payments, and all the other features.
- Review and analyze how much you can invest during your working years depending upon your earnings and source of Income. An equal analysis of your expectations is also required to determine your family's financial needs to maintain their lifestyle.
- Know the Claim Settlement Ratio along with the persistency ratio and solvency ratio of the insurer to rest assured that you will encounter an easy process at the time of claiming the policy.
What Are the Documents Required to Apply for the Long-Term Plan?
The following documents are required while purchasing a long-term plan:
- Pan Card
- Proof of address: Latest Bank statement, utility bills, ration card, Voter Id, Passport
- Proof of Identity: Passport, Aadhaar Card, Driving License
- Proof of Income: Salary Slip, Form 16, Income Tax returns
- Recent Photographs
- Proof of Age: Mark sheet, birth certificate.
What Are the Premium Payment Options Available?
The payment plan selection should be purely based on the individual's capacity to invest and save. These are the readily available options:
- Single pay: One Time payment made at the time of purchase of the policy.
- Limited pay: The premium payment term is less than the policy term in the limited pay option.
- Regular pay: When you regularly pay premiums periodically, be it monthly, yearly or quarterly for the entire policy term.
How Much Term Insurance Do I Need?
There is no set pattern to determine how much insurance is enough for an individual. Instead, the decision is subject to several considerations:
- Affordability: The amount of money you can set apart each month or each quarter from your earnings is a very subjective concept depending upon your expenses and commitments.
- Sum assured requirements: The requirements of each family are distinct. The level of comfort and utility required by you will determine how much you expect to receive post-retirement or after your demise for your family.
- Dependents: Your children, spouse, or parents who depend on your income source are affected the most financially post your demise. The amount of insurance should thus be based on the dependents you have.
- Your age: At a younger age, you can go slow and invest less as compared to when you are nearing your retirement. Therefore, the coverage you would require when you are young would be much less than what you would need in your old age.
- Current health: If you are unhealthy and suffering from any illness whatsoever, your insurance coverage should be enough to cover your medical bills. In that case, you will likely need a higher coverage amount.
Factors Affecting Insurance Premiums
The amount of premium payable varies according to several factors. Some of them have been enumerated below for better comprehension:
- Gender: Women are generally offered lower premium rates as compared to men.
- Lifestyle: The premiums you pay should be in line with the benefits receivable. The benefits receivable highly depend upon the lifestyle of your family.
- Consumption of alcohol: Excess alcohol consumption can cause health concerns and influence your post-retirement years to a great extent. Premiums are thus decided on the same basis, and they are usually high for such customers.
- Smoking habits: Like alcohol consumption, the habit of smoking excessively has a disastrous impact on your health and causes your premiums to rise significantly.
- Weight: Another influential lifestyle factor that can cause major health issues is being obese. The same is also considered while deciding the premium rates.
- Your age: Lower premiums are offered at an early age, and they increase with an increase in age.
- Medical history: Certain critical illnesses run through the families. The insurance providers determine the amount of premium after looking into the same.
Long-term plans can help stabilize the financial crunch faced by your spouse and children. With multiple options available, you can easily compare the features and benefits and select the one that suits you the best.
Ans: The minimum age of entry for a long-term plan is 18 years.
Ans: The deaths caused due to suicide and or self-inflicted injuries are generally not covered.
Ans: Securing your life as early as feasible is better. When you buy a policy at an earlier age, the premiums are low, and coverage is high. At the same time, if you have missed the same on account of financial issues, it is advisable to buy a plan as soon as possible.
Ans: Yes. Depending upon how healthy you are, the premium rates tend to fluctuate.
Ans: Deaths caused due to natural calamities like floods, earthquakes, and storms are covered under the term plan.