Term Plans To Consider

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For all those who want to know more about term plans, we will begin with the basics.

What are Term Plans?

Well, term plans are a type of life insurance wherein you get coverage at a fixed rate of premium payments for a limited period. After the expiry of this period, the previous rate of premium is no longer guaranteed. This type of life insurance is considered to be the most economical and affordable for people to choose from.

Benefits of Term Plans

  • Term Plans are said to be pure protection plans that ensure the financial stability of the dependents, in case there is an untimely death of the insured.
  • Best Term Life Insurance offers coverage. This coverage is for a fixed tenure at a fixed premium rate.
  • In case the insured person dies an untimely death during the policy term, the nominee of the life Insured gets the total benefit/pay-out.
  • The benefit can be paid out as a lump sum, or a lump sum and payment on a monthly basis or entire payment divided into monthly payments.
  • The premiums paid under Term plans are eligible for Tax deductions under the section 80C of the Income Tax Act, 1961 up to an amount of INR. 1,50,000.
  • Rider Benefits: A rider refers to the important additions to the basic plan offering. They provide an option to the insured to customize the coverage.
    • Accidental Death Benefit: It ensures an additional sum assured over the base offering in case of death occurring due to an accident.
    • Accidental Disability: It ensures an additional lump sum amount if a person gets physically disabled due to an accident.
    • Critical Illness: It offers an additional sum assured over the base offering if the person who has taken a term plan is diagnosed with one of the critical illness as per the rider.
    • Waiver of Premium: It offers the insured, an opportunity to get a waiver from all policy premiums if diagnosed with a permanent disability or critical illness.
    • Option to Increase Death Benefit: A Term plan offers a wide range of plans. These include the plan where the life insured can increase the life covered at key stages like the birth of a child, critical illness, marriage, divorce, and many more.

Limitations of Term plans

  • The premium of term plans increases sharply as age advances. Thus, it becomes very difficult to meet the insurance needs economically, at a higher age.
  • Most companies do not offer Term plans beyond the age of 65 to 70 years. Even if there are a few cases where Term plans are provided at that age, there are various strings attached to them.
  • Term plans are not suitable for people who wish to save money for a specific cause like marriage, divorce, and the birth of a child, educational needs of a child, higher studies, or old age provisions like retirement needs and so on.
  • Term plans do not provide you with an income or look after the capital needs of your family while you are alive.
  • Under term policies, no loan is applicable.
  • Wealth creation is not possible through Term plans.
  • Term plans do not provide you with an edge over inflation, as they are without-profit plans.
  • If you are unwell for a prolonged period resulting in non-payment of the Term Insurance Premium, the policy gets terminated.
  • It is not designed to last for a lifetime. In fact, most people who take term insurance end up outliving the coverage and drop it because of the costs involved.
  • There are also limitations on the amount of coverage one can buy. Companies mainly have an upper cap to policy pay-outs.
  • Although it is possible to convert Term plans to an endowment or whole life policy, there are clauses attached to it.

Though a term plan may have certain drawbacks, yet when you compare it with the advantages that it brings to the table, it is certainly worth it. It is always recommended that you thoroughly compare the term plans with other life insurances plans of the same company and with term insurances plans of other companies. You are aware that there are several financial institutions that provide various terms plans. So, compare them and do your research before you opt for insurance.

“We cannot predict the future, but we can always prepare ourselves and our loved ones for all kinds of situations”! That’s what term plans are all about!