Let me enumerate the most important features of a term plan which makes it a must buy life insurance product for you and your family.
The most spectacular feature of a term plan is its affordability. A pure term plan offers life cover for a specified amount known as the sum assured and for a specified tenure known as the policy term.In case the life insured dies during the policy term, the life insurance company pays the death benefit to the appointed nominee.There is no maturity benefit payable in case the life insured survives the policy term.The simplicity of the plan makes it an affordable proposition as the insurers have to pay death claim only.Term plan is the actual form of a life insurance plan which offers the financial security to the family in the event of untimely death of the bread earner.The premium for a term plan is the cheapest as compared to other life insurance products like whole life plans, money back plans or unit linked insurance plans.The premium for the term plan comprise of mortality charges plus basic administration cost for policy issuance.Buying a Term plan is the basic step of the financial planning which safeguards your family against any kind of debts,loans and helps to sustain the current standard of living by financially indemnifying the family.
2. Easy to Buy
Just like the way you buy clothes, shoes , household things online in an easy manner, the same way you can buy a term plan too.Buying a term plan is comparatively easier than buying other types of life insurance products or financial instruments. The framework of a term plan is simple that you need not have to be bothered about what returns the plan will offer, where the company will invest my money,etc. It is a simple plan which requires you to decide the appropriate sum assured as per your financial objectives,standard of living,financial debts,etc.You can calculate the right sum assured amount using the online calculators as well.
There are 2 ways of buying a term insurance:
(i) Offline : buying is through an insurance intermediary like a broker or agent.
(ii) Online: Online buying is buying directly from the insurance company in a digital space at your convenience with a few clicks and an internet connection.Online term plans are cheaper than the offline plans with no physical documentation hassles and quick processing. The insurance company saves on the intermediary commissions and other allied costs in selling the plan online which is why the company passes the discount to the customer for buying a policy online.Online term plans are 5% to 20 % cheaper than offline term plans.
3. Term Plan with Return of Premiums
Some people hesitate to invest in pure term plans as it does not offer any maturity value.But there is another variant of a term plan known as term plan with return of premium which offers maturity value equivalent to the return of all paid premiums, if the insured survives the policy term.Such plans are slightly expensive as compared to pure vanilla term plans as it offers both death and maturity benefit (whichever happens first).The payout at maturity in case of TROP may vary from plan to plan and company to company.
4. Staggered Claims Payout Option
All term plans offer lump sum benefit in the event of a death claim to the nominee.For some, managing a huge lump sum claim amount might pose a challenge as the death claim money may be invested in wrong investmentsby your family members due to lack of financial acumen or may be misused by few greedy relatives.To overcome such scenarios, there are term plans which offer staggered claim payout under which partial claim amount is payable as lump sum and remaining amount payable as monthly/yearly income.Partial Lump sum amount helps the family to combat the existing financial crisis due to the death of an earning member where as remaining amount payable as staggered payout in the form of monthly income will help the family to take care of their monthly financial expenses.The option to choose the staggered payout can be done by the life insured at the inception of the policy.The term plans do offer nominees the flexibility to take the entire claim amount as lump sum at a discounted rate even if the life insured has opted for staggered claim payout option under the term insurance policy.
5. Flexibility in Paying Premiums
Term plans offer flexibility to pay premiums annually, semi annually, quarterly or monthly. There are term insurance plans which also offer single pay or limited pay premium option apart from regular pay premium.Such flexibilities allow the policyholder to choose the appropriate premium payment options as per his budget and convenience.
6. Offers Rebate
Life insurance companies offer rebate for opting a higher sum assured under term plans.For non smokers and female lives, the insurance companies offer special discounted premium rates as a gesture of commemorating them as a “standard life” with no adverse risk associated with them.
It is vital to assess your financial needs and take adequate sum insured for your term plan. Knowing the basic features of a term plan will certainly enable you to buy the best product basis your requirement, budget and financial objectives.Term plans bought at an early age will be the best financial decision which will keep you worry free for the rest of your life and helps you to attain bigger financial goals in your life.It is always better to be safe than sorry.
Harjot Singh Narula, Founder & CEO, www.comparepolicy.com
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