Compared to any other life insurance policy, term plan are known to provide comprehensive financial protection to your family in case of your premature death during the policy tenure.
Term plans are protection plans that are designed to protect your family and loved ones from unforeseen circumstances by providing financial security. They are the most effective and important insurance plan for any individual.
They come with multiple benefits and are one of the basic financial necessities of life, especially in today’s time.
Let us learn more about term plans in detail.
What is a Term Plan Insurance?
Term plans are pure life insurance cover and it doesn’t have any savings or profit component included in the life insurance policy. It provides a larger life insurance coverage amount for a specified time period at a lower premium compared to other types of life insurance policies.
The plan benefits are paid to the nominee if the policyholder dies during the policy period and if the insured completes the term plan duration, no maturity benefits are provided. Basic term insurance provides coverage against the risk of death. There are also multiple add-on benefits like permanent disability coverage and critical illnesses coverage etc.
Features of Term Plan
Large Coverage at Lower Premium
The term plans provide financial security to your family during unforeseen times at an affordable cost. Users can opt for higher life coverage for a nominal premium which is lower compared to endowment plans or any other forms of life insurance policies.
Since term plans include no investment or maturity benefits, it can pass the cost benefits to the user by keeping the premium rate lower. Compared to the endowment policy, the premium amount is almost one-tenth for the same amount of sum assured.
Term plans are highly flexible life insurance policies that can be taken for a period as low as 10 years and can be taken up to the age of 75.
You can also increase the sum assured amount at set intervals or life events like marriage, first child and second child to match with the requirement of your family.
Once the policy documents are accepted by the insurer, the premium amount stays fixed for the whole tenure of the policy. There will not be any increase in premium amount whatsoever the case, except there are any changes in taxes.
The insurer provides benefits of the lower premium amount if you start early in your age. Also, non-smokers/ non-tobacco users get the benefit of a lower premium compared to smokers/tobacco users, as they lead a healthy life devoid of any addiction.
Low Claim Rejection
If you have disclosed all the facts about your health, lifestyle and finances, then chances of claim rejection are lowest. Moreover, as per IRDA directives, insurance companies cannot reject a claim based on non-disclosure of facts if the term insurance plan is effective for more than two years.
The policyholder can subscribe to add-on benefits at the time of purchase of the policy to suit their requirements. Insurance companies offer add-on benefits like partial/permanent disability coverage, accidental coverage, critical illnesses coverage, income guarantee etc.
Easy to Understand
Compared to the endowment policies, money back plans, whole-life insurance policies, term plans are very easy to understand and straightforward. Term plans are very transparent and you only need to take a handful of decisions like the sum assured amount, policy tenure, compensation mode (lump sum or instalment) and add-on covers.
Why You Must Include a Term Plan in your Financial Plan?
Uncertainty is a buzzword nowadays and in everyone’s life, an element of risk and concern prevails that restricts them to live life to the fullest. Term insurance helps to eliminate all such risks that could result in financial trauma for your family.
Term plan insurance ensures your family is least impacted financially in case of an unforeseen situation and lets them continue to pursue their dream and fulfil other obligations. Moreover, if you have any liability like home loan, auto loan, you must take a term plan equal to the loan amount to prevent any burden of repayment on your family in your absence.
The size of your term plan should always be based upon the family’s financial goal, financial dependent and liabilities.