Life is short and one can never foretell what the future holds. To make sure that your family is financially secure even after you are gone, opt for a term insurance. A term plan helps you prepare for such uncertainties. One of the most cost-effective methods by which to mitigate risk, term insurance is popular primarily because it asks for low premiums yet the family of the deceased gets the entire amount.
If one survives the policy tenure, the term insurance would not give any maturity or survival benefits. Very recently, insurance companies have come up with the benefit that in case of a survivor, the company would pay back a certain portion of the total premium paid.
One requires to keep a few things in mind before buying a term insurance. A few basic points to be remembered are:
The term insurance should be able to provide the family with the adequate income in case of an unfortunate death.
The tenure of the term plan should cover the span that an individual intends to work. A term insurance should cover at least 65 years.
Here are a few reasons why anyone should buy term insurance:
- Low Premium– Since there is no investment element in the insured amount, the premium for all term plans are much lower than any other insurance plans. Any individual might have to pay only about one percent of his annual income to get a life cover. Since this element is not there in the insured amount, the premium for term insurance is less than that of other insurance policies. For example., A policy of 1crore would have a premium of only Rs7,400 per annum.
- Provides Financial Security– An untimely death is unfortunate and so are the financial liabilities that require to be borne by the family. To prevent such a situation from arising, it is a good idea to invest in a term plan that would take care of the financial needs of the family.
- Highly Flexible– Flexibility is one of the major advantages of a term plan. You can select any online or offline plans for which health plans are not mandatory. You can also change the plan and customize a term plan as and when required.
- Low Claim Rejection– When you buy any term plan, make sure you disclose correct facts about your health condition, finances, habits etc. As per the recent Insurance Regulatory and Development Authority (IRDA) mandate, no insurance company can claim that there has been a non-disclosure of facts after two years of the policy becoming effective.
- No Brokerage – Typically, brokerage fee is mentioned under the premium allocation charges and often, this is a recurring expenditure. Every time you pay the premium, a certain percentage of that payment is allocated towards the brokerage charges. The fraction of your payment being allocated towards brokerage keeps on decreasing gradually with time. Usually, brokerage charges account for approximately 5 to 6 percent of the total premium payment. But if you buy a term plan online, usually no brokerage charges are applied at all. This way you end up saving the 5-6% of your hard-earned money that’s allocated towards brokerage charges when you buy offline.
- Riders– Riders are the additional benefits that come with term plans to suit the requirement of the policyholder. These come with a nominal fee and should be taken only if required. Some of the riders that can be taken along with term plans are critical illness, death due to accidents, partial or permanent disability etc. You should buy a rider only in the case of genuine need and should carefully go through the offer document for exclusions before buying a rider.
A term plan has got various advantages. It takes care of the burial and funeral expenses, covers education and other expenses of the family, pays off loans/debts that might have been taken during the lifetime of an individual. It is definitely a sensible decision to take especially when life is so very uncertain.