Insurance is a concept based on the uncertainties of life. By paying a certain amount as premium, the Insured can safeguard their family in case of any untoward happening to his life. In the Life Insurance field, “term insurance” has become so popular nowadays. Let us see what is this term life insurance is all about, how it is beneficial and tips for selecting the best term insurance plan.
Know more about Term Life Insurance:
A term life insurance is set for a particular term of life. After the term plan expires and the Insured lives, they won’t get any money back – generally. There are other term insurance plans too, differing from this norm.
The basic concept here is the individual insures his life for a specific term of years – say 5, 10, or 30 or more years – then if anything unexpected happens, the Sum Assured will be paid to the nominee. ‘
What are the different types of Term Insurance?
- Level Term Plan – where the Sum Assured is fixed throughout the plan period and benefits will be paid to the nominee. No return of premium amounts.
- Return of Premium Plan – the total premium amount exclusive of taxes will be paid in full at the end of the term.
- Increasing Term Plan – The insurer increases the Sum Assured every year at a pre-determined rate i.e. 5% or 10%, but the premium amount remains constant. Normally, the premium amount for these term insurance plans will be higher than usual.
- Decreasing Term Plan – Every year the Sum Assured will come down. This facilitates the Policyholder when they take big Home Loans or Personal Loans, and starts paying Equated Monthly Installments (EMIs)
- Convertible Term Plan – The Policy Holder is given the option to convert the term plan into other types like whole life plan after some years or endowment policy of the Insurance company.
- Riders – During the Policy Term, the holder is given the option to add “Riders” (additional benefits) like Accident Insurance, critical illness insurance coverage etc. A small extra premium will be charged for these options.
Benefits accruing for Term Insurance Policy Holders:
Term Life Insurance is ideal for all age-groups – especially for youngsters. At the beginning of their career, if they take the best term insurance plan, they can be worry-free. Comparatively, they need to pay only a smaller amount of Premium because they are healthy.
When their life changes by marriage, childbirth or dependency of other relatives on them, they can change the Policy coverage accordingly, as they wish. Normally, term life insurance is best option to derive maximum death benefits at lowest premiums, compared to others.
At the start of the career, youngsters’ earning will be less, which will increase over years. They can pay more premiums and get best money-back in value. This is an indirect saving from their income.
A variety of options are made available for the Policyholder such as Convertible Plans, increasing or decreasing sum assured, the addition of a plethora of Riders to suit their needs etc.
Normally, the Insurance Premiums, Cash Benefits and Payment of Sum Assured as death benefit are not taxable. The Policies issued by life insurance companies can be used as collateral for personal loans and other mortgages etc. from Banks.
Tips for selecting the best term insurance plan:
- As on date, there are several Private Sector Insurance Companies competing with each other, in offering fabulous term insurance plans and Policies.
- All of them are available online, and are just a click away on your computer device. Go and have a leisurely search of those companies, which are in the forefront.
- Check for Higher Claim Settlement Ratio of each popular Insurance Company. This will give you an idea of the total number of claims received by the company versus claims settled. If the Ratio is more, you have excellent chances of getting the claims settled promptly.
- Check the facility of Riders to maximize the coverage with the lowest premium. Select the ones needed by you like accidental insurance; disability cover; waiver of premium; and such other additional covers.
- Consult with your friends and Financial Advisors about your family requirements, lifestyle-based income per month to run the family, your financial ability etc. to select the best term insurance plan and buy the Policy.
