Few Things You Should Know About Term Insurance Plans

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With numerous investment options available in the market, making the best choice may become a cumbersome task. If you seek a pure life cover at the most affordable rate, you may consider investing in a term insurance cover.

A term insurance plan, as the name suggests, offers coverage for a certain term. In case of an unfortunate event of death during the policy period, the beneficiary is entitled to receive the sum assured amount. This amount may be used to fulfill financial obligations such as meeting lifestyle needs, covering funeral costs, meeting educational costs, and repaying any existing debt, among others.

It is important to make a well-informed purchase decision. For this purpose, you must have complete knowledge about certain features and benefits of term plans.

Following are five things that you may keep in mind while buying a term cover.

1. No returns

It is important to note that term plans are a pure life cover, and hence do not provide returns. Such a plan is not designed to offer returns post-maturity, and hence may not be used as an investment option.

2. The need for a term policy

A term plan provides a safety net for your loved ones even in your absence. The insurance provider is entitled to pay the sum assured amount, which may be used to meet numerous financial needs of your near and dear ones. Such a plan is an excellent option if you are the breadwinner of the family as it acts as an income replacement and sustains your family.

3. The sum assured amount

An important aspect to take into consideration while buying a term insurance policy is the sum assured amount. You may keep in mind your family’s expenses based on their lifestyle habits and decide the sum assured amount accordingly. Besides, you may also consider inflation and rising costs. You may reassess your needs every few years and enhance your coverage accordingly.

4. The policy period

The golden rule for deciding the policy period is to deduct your current age from your retirement age and opt for a term policy for that long. Hence, if you are in your twenties, you may consider a term of 40 years. It is advisable to purchase a term policy early in life as insurance providers offer higher life cover at a low price, due to the low-risk factor.

5. The right insurance provider

It is imperative to choose the insurance provider that best suits you. You may zero in on a particular insurer after considering various aspects such as market reputation and financial background. You may also have a look at the claim settlement ratio of the insurer. Higher the claim settlement ratio, higher is the chance of your claim being settled. You may also consider the solvency ratio of the insurer to determine, as it is an indicator of financial strength.

Term plans offer numerous advantages, such as low price, flexibility, and tax benefit, among others. You may, therefore, keep the aforementioned points in mind before going ahead and purchasing one. By doing so, you may financially protect your loved ones even in your absence.

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