How To Select The Right Term Insurance Plan?

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One of the most fundamental and conventional types of life insurance is an annuity insurance plan. These plans essentially serve as protection against unforeseen events for one’s family by providing financial stability to cover their expenses in the event that you are no longer present. 

The term of a term insurance policy is the length of time that is specifically designated to it. The insurance company is required to pay the sum assured to the policyholder’s nominees in the event that the policyholder/life insured passes away during the period of the plan. 

The benefit is only paid in the event of the policyholder’s death, and the sum assured is the coverage amount that was agreed upon at the time the policy was purchased. If the life insured is still living when the term plan’s fixed term expires, the plan will have reached maturity. No reward is given to the insured after the plan matures. This is true of the term insurance plan with death benefit called pure protection. 

A term insurance calculator is a tool you may use online to determine the amount of coverage required based on your needs. With their coverage and term insurance advantages, many term insurance plans have been roughly categorised into six basic types. 

  • Level Term Plans 

This is the most fundamental and straightforward form of term insurance, with benefits being paid to the nominee upon the death of the life insured and the sum assured remaining constant during the course of the policy. 

  • TROP (Return of Premium) Plans

These policies, unlike level term insurance, have a maturity benefit that returns the whole premium paid to the life insured if they live over the policy’s term. 

  • Increasing Term Plans

Under these plans, the policyholder has the option to keep the premium amount constant while increasing the sum assured on an annual basis throughout the policy term. Because of this, the premium for these policies is a little bit greater than it would be for level term insurance. 

  • Decreasing Term Plans 

Contrary to rising term plans, the sum promised in these plans continues to drop each year in order to satisfy the dwindling insurance needs of the life assured. These programmes are useful when a policyholder has previously taken out a sizable personal or house loan or is currently making EMI payments (Equated Monthly Installments). With the payment of EMIs, this plan’s promised sum continuously decreases at a predetermined frequency. Moreover, it lowers the total loan amount.

  • Convertible Term Plans  

These plans have a conversion feature that allows the policyholder to change them into any other kind of plan at a later time. For instance, if you get a 20-year term insurance policy but decide after five years that you would like to change it to a whole life insurance policy, an endowment policy, etc., you can do so without any problem. 

  • Riders to Term Plans 

This type of plan includes rider options that can be purchased in addition to the standard term plan for a modest additional premium. These choices include critical illness cover, accidental death cover, and others. For instance, if a person chooses a rider and receives a premium waiver benefit, s/he won’t be required to pay any further premiums in the event that anything happens to the specific rider s/he has chosen.

Things To Have In Mind While Purchasing Term Plans: 

Only some people are financially knowledgeable, especially regarding money management. Consider scenarios where you unexpectedly pass away, and your nominee decides to invest the entire amount of your term plan in one go. 

Let’s imagine he invests the money in a chit fund on a friend’s or family member’s recommendation and ultimately loses it all. That’s something you wouldn’t want to occur. This money must be carefully maintained because it is intended to cover your family’s expenses when you are not available. 

As a result, be sure to explain to and educate your selected nominee about what is term insurance and what to do with the sum assured. The urge to overspend is a crucial additional consideration. The urge to overspend is fairly common when someone suddenly has access to a lot of money. One could overspend while shopping in a hurry and buy items that are ultimately out of her or his price range. 

A term insurance calculator is an easy-to-use tool to check the amount of premium you would have to pay. You can also choose to go with online term insurance policies if you have little time. Insurance companies now make ongoing efforts to improve the usability and accessibility of their websites.

It is important to understand what is term insurance to make the right choice.

 

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