We all work hard to ensure that our loved ones always have a better today and tomorrow. One of the most important instruments that can ensure the financial safety of your family is a Term Insurance Plan.

What is a Term Insurance Plan?

A Term Insurance Plan is a kind of a life insurance plan that compensates the beneficiary of the insured person, in case of the unfortunate death of the insured during the policy term. The sum insured opted under the policy is payable as a death benefit to the beneficiary or nominee on filing of a death claim with the insurance company, assuming the policy is premium paying.

How does a Term Insurance Plan work?

Term Insurance Plan is a pure insurance cover. It is the simplest form of life insurance for securing the financial future of your loved ones in your absence, by financially indemnifying them to live their lives as before. Affordability is an essential aspect of a Term Insurance Plan. Under a Term Insurance Plan, the individual can get a high coverage amount at the most affordable premium price.

Term Insurance Plan is a pure protection plan that offers death benefit on the death of the insured during the policy term, with no maturity benefit given on survival till the completion of the policy term.

The premiums under the term plans are affordable, and with the availability of online term plans, one can further avail a reduced premium, since there isn’t any cost of intermediaries like agent commissions. This makes Term Insurance Plans, the cheapest, and the most affordable form of life insurance. Also, insurance companies offer differential premium pricing for females and non-smokers which further lowers the premium cost. Opting for a large sum of the insured amount also helps in getting an additional discount on premium from your insurer.

It also helps you to get a tax benefit under section 80 C of the income tax act of the land. Also, a term plan bought at an early age offers lower premium rates.

Why Is Term Life Insurance Important?

Considering the fact that life is unpredictable, one should always have a backup financial arrangement to support his/her family. Also, looking at the mounting inflation, lifestyle expenses, education expenses of children, easy monthly installments (EMI), etc. survival of the family members in the absence of an earning member becomes tough (even if you have some savings in hand). To combat the financial crisis in these scenarios, a substantial fund or corpus is necessary for the family members to continue their lives with some financial comfort. It is not easy to build such a corpus with few handfuls of savings or investment schemes. A term plan takes care of your family’s financial needs and provides them with financial stability through lump sum payout in times of distress.

Benefits of Term Insurance Plans:

• Payout Options – are offered in, lump-sum amounts at the end of the term, staggered payouts along with the lump sum amount, regular monthly income along with the partial lumpsum amount
• Riders – are available in the form of accidental death benefit rider, critical illness rider, and waiver of premium rider for comprehensive protection against death, disability, accident or disease
• Premium Payment Mode - available as monthly, quarterly, semi-annually or annually, as per one’s financial comfort of premium payment

What are the different types of Term Insurance Plans?

A Term Insurance Plan comes in various forms, and knowing the differences can help you in selecting the Term Insurance Plan that best suits your needs.

Term Insurance Plans can be classified into the following six types:

•    Level Term Plans

•    TROP (Return of Premium) Plans

•    Increasing Term Plans

•    Decreasing Term Plans

•    Convertible Term Plans

Here are more details on Term Insurance Plans:

Level Term Plans

Level term plans are the most basic Term Insurance Plans. In level term plans, the sum assured is fixed throughout the policy and the benefits are paid to the nominee on the death of the life insured.

TROP (Return of Premium) Plans

TROP plans come with a maturity benefit. On surviving the policy tenure, the life insured gets back the total paid premium.

Increasing Term Plans

In increasing term plans, the policyholder can increase the sum assured on annual basis during the policy tenure, with the premium account at the same value. The premiums are slightly higher than level term plans.

Decreasing Term Plans

In decreasing term plans, the sum assured keeps decreasing each year to meet the decreasing insurance needs of the life assured. This plan works best for individuals who have already opted for large loans in the past.

Convertible Term Plans

By opting for a convertible term plan, the policyholder can convert one type of term insurance pan into another type of plan at a future date. This helps the policyholder to adapt the plan as per his/her financial targets.

A Term Insurance Plan should be a priority, considering the unpredictable nature of life!

Feb 57/19

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