Term plans - Meaning, Features, Benefits
Table of Contents
Term insurance plan is a kind of life insurance plan that offers financial protection to your family at a very reasonable cost. The object of this Insurance plan is to make sure that the financial needs of the policyholder's family is well taken care of after his or her unfortunate demise. The sum assured was paid to the family in case of demise of the assured within a specified time period.
A term insurance is like a back up plan that will support your family if something unfortunate happens to you in the near future. It will provide much needed financial support to meet your family's daily expenses and fulfill their long term goals (like children's education, marriage, etc.) Also with the help of riders, you can cover disease and disability under a term insurance plan. It is one of the most affordable ways to protect the financial future of the family.
Benefits of Term Insurance
Here's a list of a few benefits of term insurance plans:
Financial Stability
This is the basic reason why people opt for any kind of insurance and rightfully so. The death of the breadwinner of the family or any other earning member can turn the life of the remaining family members upside down. In such a situation, managing household expenses and taking care of the basic needs of the family becomes an extremely difficult task. Term life insurance provides a complete sum assured at the time of death and can make life of the remaining family members easier, albeit financially.
Securing the Future
Every earning member of the family has some responsibilities and obligations towards his/her spouse, children and parents. Death can effectively stop you from meeting those obligations. With term life insurance plans, you can plan your future accordingly. In the event of your death, the payment from the insurance company will ensure that your children will get a good education and have funds for their marriage. Similarly, with the right term insurance plan, your spouse and parents can also have a comfortable life without facing any financial hardships.
Debts
Almost every individual has some or the other loan. It can be an auto loan, home loan, personal loan or education loan. The proceeds from the insurance pay off your loans along with interest and ensure that the burden of these borrowings does not fall upon your family.
Massive Coverage, Low Premiums
Due to the absence of maturity benefits and other complexities, the term insurance plans offer high coverage at premiums which are affordable to the majority. Cost of, if you buy life insurance plans online, the premium rates are even lower due to the absence of agents and middlemen.
Features of Term Insurance Plans
The main features of a term insurance plan are as follows:
Affordability
Because the policy covers the death benefits hence they charge a very low premium. Due to this reason more people find it reasonable to put their money in term insurance.
Higher Coverage
These term life insurance policies do not put any form of limitations in their coverages. Hence one can choose higher coverage plans as per their requirement for a better and secured financial future.
Long Term Coverages
The coverage periods of these term life insurance plans comes with a very long term. These plans can cover upto 40 years which freely allows the purchaser to enjoy the policy till very old ages.
Variety of Premium Payment Terms
The premiums of these term life insurance plans can be paid either monthly or all at once. It is the discretion of the policy purchaser how he wants to get covered at the end of the term. Moreover, there are a wide array of premium payment terms available with these plans.
Types of Term Insurance Plans
Following are the few types of term insurance plans available:
Level Term Plans
The default life insurance coverage provided by most insurers in India is a level term plan. It is the most common type of term insurance plan. In this type of plan, the sum assured selected at the beginning of the policy remains constant throughout the policy term.
Increasing Term Insurance
This type of plan offers the facility to increase your sum assured at specific points in the policy term.The rate of this increase is predetermined.This type of plan is a great choice for keeping up with rising prices and ensuring that your family has enough funds to sustain after inflation.
Decreasing term insurance
As opposed to increasing term insurance, in this case, the sum assured decreases at a predetermined rate as your age increases. It works on the idea that as your age increases, your liabilities might decrease and the need for a higher sum assured too might decrease. It is well suited for you if you have taken out a loan or a mortgage and expect to pay it off in the near future.
Return of Premium Term Insurance
A new and very popular type of term plan, a return of premium plan, provides you with a savings component, which is generally not offered by term plans. In the event that you outlive your policy term, all paid premiums till the maturity date are returned to you. The return of premium is made only if you haven’t made any claim during the policy term.
Convertible Term Plans
A convertible term insurance plan is a policy that can be converted into another type of insurance plan at a later stage; for example, a whole life plan or an endowment plan.
If you expect your financial priorities to change in the coming years, you can opt for this type of term plan.
Conclusion
This article covers most of the reasons which proves that term insurance plans are growing in India. The term life insurance plans are reaching out to more and more people because of the benefits they provide and also their key features that have been clearly said in this article.
Also read: How Can You Compare Different Life Plans
