If you choose it right, term life insurance plan can add a lot of value to your financial plan.
Harjot Singh NarulaThe term insurance plan is a pure life insurance plan which gives you an option of buying life insurance in the most economical way. It is also known as a pure life insurance plan because it provides cover against death only, without any investment and saving component. There are multiple benefits and features associated with a term insurance plan. But still, many of us may not be aware of these facts about a term insurance plan. So, let’s look at seven must know facts about a term insurance policy.1. Most economical way to get a life insuranceIn comparison to other traditional life insurance, a plain vanilla term insurance plan is the most economical way to get a life insurance. You can get sum insured of Rs 1 crore at a nominal premium. Low premium rates are available in term insurance plan because it gives cover against death only and no maturity value (except for TROP plans mentioned in the latter point) is payable. Term insurance is the best option for people looking to buy life insurance on a low budget.2. You can get your premiums back on maturityThe major reason why people don’t buy a term insurance policy is because there is no return upon survival or no maturity value. If the insured person survives the policy term, he gets no return as it does not inculcate the elements of saving and investment. But there is another variant of a term plan known as term insurance plan with return of premium (TROP). In TROP, if the insured person survives the policy term, then all his paid premiums are returned (amount of premium returned may vary from company to company). Of course, the premium for TROP is bit higher than the premium for pure term life insurance plan.3. Option of convertibility and ridersOur need is not always the same. With changing circumstances, our needs also change. To fulfill the changing needs of the insured person, term insurance plan comes with an option of convertibility. This convertibility feature of term insurance plan gives you an option to convert your existing term insurance plan into a permanent life insurance plan during the policy term or at the completion of the policy term.There are also many riders (add-on benefits) available with term insurance plans which can be added to enhance the policy coverage. You can add these riders to get extra cover at an additional cost. Some of the riders available with term insurance policy are:–Accidental death benefit rider-Critical illness rider- Waiver of premium rider- Permanent or partial disability rider4. Receive death benefit as monthly incomeIf you don’t wish that the death benefit should be paid at once as a lump sum amount to the nominee, there is another alternative for you. You can choose to spread out the policy sum assured as monthly income at the policy inception as it might be difficult for the family members to handle, utilize and invest the whole amount payable on a claim. Many term insurance plans offer the option to receive the entire or partial claim amount as level/increasing monthly income.Later,at the time of claim if nominees wish to take the entire amount as a lump sum, they can avail the same at a discounted value as offered by some term plans.5. Buying online is easy and cost-effectiveBuying a term insurance policy online has a lot of advantages over an offline purchase of a term plan. Online term insurance policies have the major advantage of cost effectiveness, as online term insurance doesn’t involve the cost of an intermediary commission,therefore, the company offers a rebate on premium rates. The procedure of buying online term insurance policy is very easy as it requires less documentation and is a hassle free process.6. Cover enhancementDuring the policy term in a term insurance plan, you have the option to increase your cover or sum assured at milestone stages of your life like marriage, childbirth, etc. The percentage of increase in cover varies from company to company and plan to plan.7. You can choose your policy term & premium payment termTerm insurance policy gives you the option to choose the tenure/term of the plan like 15,20 or 30 years as per your future financial requirements and obligations. You don’t need to pay premiums for your whole life. You can also choose a term insurance policy which offers a single pay ((pay a premium once and get coverage throughout the policy)or limited pay option (pay a premium for the selected policy term and get coverage throughout the policy). This feature of term insurance policy makes it a risk management tool against your debts/ loans also. You can choose a policy term, according to the outstanding loan and minimize the risk easily.Term insurance policy doesn’t only provide you an economical option to buy a life insurance policy, but it also gives you the flexibility with a bundle of benefits. A term insurance policy can do wonders to your financial planning if you customize and choose it well.