“The future depends on what we do in present” is a very famous quotation by Mahatma Gandhi & quietly related with a Term Insurance Plan or Term Plans as they are called. Imagine, if a person is only earning member in his family & any uncertainty happen with him? Obviously, his family will face a financial crisis. Term Plan is made for such extreme life situations.
In simple words, the Term Plan is an insurance plan which provides financial coverage to the policyholder for a predefined period. If the policyholder dies before the maturity of the policy, the death benefit is paid by the insurance company to his/her nominee.
Term Plans offer higher coverage in comparison to various other policies like Moneyback or endowment in low cost (premium).
Followings are the benefit & eligibility criteria of a Term Insurance Plan
Cost Effective – Term Plan is the cheapest insurance plan amongst the all available insurance plans. There is no investment component & the entire amount goes into life cover only, hence the charges are very low.
Higher Sum Assured – Term Plan is the only insurance product which is precisely designed for life cover only. There is no capping of any maximum amount under a term plan. If you qualify under the underwriting process of the company you may avail sum assured of 10 Lakh or 5 Crore as required by you.
Life Stage Protection Benefit – It’s a special feature of a term plan which allows you to increase your sum assured when you reach a key milestone of your age without any medical check-up. If you are a young married & blessed with a kid or young bachelor getting married recently than you must feel an extra sum assured for your new dependent.
This feature gives you the freedom to increase your sum assured. This is to remember that the feature is available after fulfilling the conditions which are mentioned under policy guideline by the insurer.
Tax Benefit – Premium paid for all life insurance is exempted for up to maximum Rs. 1,50,000/- under section 80(C) of Income Tax Act. The claim amount received by the nominee in case of death of policyholder is also tax-free under section 10 (10D) of Income Tax Act. Calculate your Income Tax here and see how Term Insurance Plans can help you save income tax.
Eligibility Criteria – The eligibility criteria for a term plan is vary from company to company. In general, the minimum age is 18 year & maximum age limit is 65 year. It is advised to avail at lower age as premiums are directly linked to mortality and hence rise at a higher age.
Following points are needed to be considered before selecting a Term Plan
Claim Settlement Ratio – Before buying a term plan it’s important to check the claim settlement ratio of the insurance companies. It is very essential as your nominee will go through the claim process in case of your sudden demise. Hence, it’s necessary to compare the claim settlement ratio of the companies & choose that one which has the highest claim settlement ratio & hassle free settlement process. To know more about the claim settlement ratio, click here.
Cover Amount – Only having a term plan will not solve your purpose. One actually needs to calculate the sum assured amount of plan before buying a term plan. It’s the amount which will be received by your nominee or family members. To choose the right amount that one require one needs to add basic expenses that will be incurred by the family. These could be children’s education, marriage, personal liabilities such as home loan & vehicle loan. So, go for that term plan which provides adequate cover.
Tenure – After selecting the adequate amount, it’s also important to choose the right tenure of term plan. Take a term plan for the time, until you plan to work. Don’t go for a short period of time to 15 to 20 years which will be mature while you complete that age of 40 or 45 years. So select the tenure of the term plan as per your need and which provide cover till you require it.
Exceptions – Before going for any term plan, thoroughly check the exceptions to the term plan policy.
Add on cover – Several term plans provide add on cover riders such as critical illness & waiver of premium along with basic life cover. You can add these riders with your term plan. Compare all available plans and go for a plan which provides the same cover with minimum charges.
Charges – Opt for that term plan which has lowest charges as it will provide you same cover amount with a minimum period.
May go online – It is the technology era and all companies are offering term plans online also. Now it has become less time consuming, convenient & paperless also. The premium is much cheaper also as there is no mediator costs involve to it & benefit directly goes to the policyholder.
Hope the points will benefit you to choose a right term plan for you.
