While our futures might be uncertain, we would always like to provide our family with the best financial support available. A term plan is a security blanket for your family when you are no longer a part of their lives. Over course of time, we have discussed several instruments of investments. Today, let’s get to understand term insurance better.
What is a term insurance plan?
In simple words, term insurance plan is life insurance policy that will provide you coverage for a specifically defined period of time. A term plan is useful to secure your family in case of an emergency, future uncertainties and in case of death.
What kind of premium does a term plan attract?
The premium for term plans is comparatively lower than other life insurance policies. In life insurance policy, a part of the premium is used as investment however in a term insurance plan, the entire premium is used as risk cover.
If the holder expires during the insured term, the nominee receives the death benefit.
However, if the policyholder survives, there is no maturity benefit that is offered if the policy term is over. Certain plans return the premiums paid by the policyholder if they survive. The premiums can be paid in easy monthly instalments or even quarterly or annually.
What kind of plans are available?
There are two kinds of term plans; single life and joint life.
In a single premium life insurance plan, a person is insured for a specific period of time.
A joint life plan may prove to be advantageous for a couple as both the partners are provided with complete coverage. In case of death of either partner, the death sum assured will be paid.
In case of sudden death of the couple, their nominee would be paid the entire sum.
What criteria one must fulfil to be eligible for a term insurance plan?
Term plans have age criteria of 18 years to 65 years. The older you are, the higher the premium you pay.
Are term plans tax-free?
All the premiums paid towards term plans are exempted from tax up to a maximum limit of 1 lakh. The claim amount that a nominee might receive is exempt from tax under Section 10 (10D) of the Income Tax Act.
Can I change my term plan midway?
Most term plans are convertible which means that at any stage, you convert it to a regular life insurance policy or an endowment policy if your insurance company provides the facility. A nominal fee might be charged depending on your insurance provider.
One can surrender a term plan by paying the surrender charges which varies from one company to the other.
Can I plan the stages in which the nominee gets a payout?
Many term insurance plans offer a protection plan that gives you multiple payout options.
The nominee received a lump sum payout or a lump sum payout and a monthly income. There are other options available, too.
What is life stage protection?
Certain term plan providers offer something called the ‘Life Stage’ protection. When one gets married or starts a family, our responsibilities increase. The life stage protection options offers you an opportunity to increase your coverage by paying an additional premium.
What are some things one should keep in mind before buying a term plan?
Some of the important things you must keep in mind while opting for a term plan is as follows:
- Track record of the insurance company in settling insurance claims
- Ease of claim settlement for the survivor
- What amount of coverage you should go for keeping in mind the likely future expenses and inflation.
- Terms and conditions associated with the term plan
I hope you found this guide to be useful. When it comes to investments and money, it is always important to read the fine print carefully. I also urge you to discuss your options with your financial manager before making any decision. If you have any questions, please feel free to ask me below.