Purchasing a term plan is one of the biggest decisions in life as it can bring financial stability to the life of your loved ones in case of your demise. Read this post to know five things that you should know before making the purchase.
A term plan is one of the most affordable ways to purchase life insurance. It is a simple insurance product that insures your life for a fixed duration if you continue paying applicable premiums. In case of your demise within the policy tenure, the insurer will pay the death benefit to your beneficiary.
This death benefit can play a critical role in the financial stability of your loved ones when you are not around anymore. But as simple as this product might seem, you should always purchase Term life insurance very carefully. If you are about to purchase a term plan, here are 5 things that you should keep in mind-
- What is the Sum Assured and Tenure of Term Plans?
In simple words, the sum assured, or coverage is the amount that the insurer will pay to your beneficiary in case of your demise. Your policy premium will abundantly depend on the coverage you select. So, select a coverage amount that you feel will be adequate for your family, at least for a considerable duration after your demise, while ensuring that the premium is affordable too.
Term plans are fixed ‘term’ or tenure insurance plans. It is only in case of the policyholder’s demise within the policy tenure that the insurer is liable to pay the insurance coverage to the beneficiary. You can generally find term plans with tenure options ranging from 10-30 years and more.
- What are the Different Types of Term Plans?
Insurers now offer many different types of term plans to effectively match the insurance needs of the customers. These options can vary between insurers. Some of the most popular term plan types are as follows-
- Pure level term plan
- Return of premium plan
- Increasing sum assured plan
- Term plans with income benefit
Try to know more about these different types of term plans to understand how they vary from each other. This will make it easier for you to make the final buying decision.
- What if the Policyholder Survives the Term Plan Tenure?
With most standard term plans, the insurer is not liable to pay anything to the policyholder if he/she survives the policy tenure. But as many people are not comfortable with the fact that they will not receive anything even after regularly paying the premiums throughout the policy tenure, insurers have introduced different types of term plans.
For instance, you can consider purchasing a return of premium plan. In these plans, if the policyholder survives the tenure, the insurer will repay the entire premiums paid by him/her over the years, except the taxes.
- What are the Different Payout Options You Can Select with a Term Plan?
Insurers now offer many different payout options. For instance, you can select the lump sum payout option if you want your beneficiary to receive the entire death benefit at once. Alternatively, you can also go with the monthly payout option, which will provide a monthly income to your beneficiary for a fixed duration on your demise.
You can also go for a combination of the lump-sum payment and regular income. Thoroughly understand all the different payout options offered by your insurer to select the one you feel would be the best for your family.
- What are Term Plan Add-ons?
The add-ons are additional benefits that can be purchased with your term insurance. They do an excellent job of enhancing the scope of your policy. For instance, you can consider purchasing an accidental death benefit add-on so that your beneficiary receives an additional sum incase you die in an accident.
While the add-ons slightly increase the insurance premium, they significantly increase the features and benefits of your term plan. Apart from the accidental death add-on, you can also consider critical illness cover and waiver of premium add-on.
Purchasing the Best Term Plan in India
The term plan you purchase now can have a significant impact on the financial wellbeing of your loved ones in the future. So, ensure that you give some time to the selection process and only go ahead with the purchase when you are confident about your decision.
If you are unable to decide, an insurance advisor from a reputed insurance company can help. Do consider professional assistance rather than purchasing a term plan you do not understand entirely.