Understanding Term Plans- Types, Features And Benefits?

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 are well taken care of after his or her unfortunate demise. The sum assured was paid to the family in case of the demise of the assured within a specified period. 

What Is A Term Plan?

A term plan is like a backup plan that will support your family if something unfortunate happens to you shortly. It will provide much-needed financial support to meet your family's daily expenses and fulfil 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 Policy

Let us check the following important benefits of term insurance plans:

1. 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 lives 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 the life of the remaining family members easier, albeit financially.

2. 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.

3. 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.

4. Massive Coverage, Low Premiums

Due to the absence of maturity benefits and other complexities, term insurance plans offer high coverage at premiums that 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 term insurance plans are as follows: 

1. Affordability 

Because the policy covers the death benefits they charge a very low premium. Due to this reason, more people find it reasonable to put their money in term insurance.

2. Higher Coverage

These term life insurance policies do not put any form of limitations on their coverages. Hence one can choose higher coverage plans as per their requirement for a better and secured financial future.

3. Long Term Coverages

The coverage periods of these term life insurance plans come with a very long term. These plans can cover up to 40 years which freely allows the purchaser to enjoy the policy till very old age.

4. 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 is 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: 

1. 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.

2. 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.

3. 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 shortly.

4. 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. If you outlive your policy term, all paid premiums till the maturity date are returned to you. The return of the premium is made only if you haven’t made any claim during the policy term.

5. 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 that prove that term insurance plans are growing in India. The term life insurance plans is 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. 

You may also like to read - What is The Right Way To Choose Term Insurance?

Disclaimer: This article is issued in the general public interest and is meant for general information purposes only. Readers are advised not to rely on the article's contents as conclusive and should research further or consult an expert in this regard.