Term Insurance Plans

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Choosing the Right Type of Term Plan

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A Term plan though is the simplest form of life insurance, there are several choices that you may still need to make upfront.Various aspects that you may need to understand and analyze before zeroing into the plan include:

1) Sum Assured –

Sum assured is the amount that the nominee is supposed to receive from the insurance company in case of the unfortunate and untimely demise of the policyholder. The minimum amount of Sum Assured that you should be looking for would depend on the potential financial obligations that your family is expected to cover in the event of an untimely demise. Some of the obvious future obligations that you need to build in your calculations include repayment of home loans or car loan if any, annual expenditure that would be required to run the rest of the family and one- time expenses like marriages and education of your children.

It is also important that while you are calculating your future costs, please do not forget to build in the cost of inflation. All your expenses are expected to increase at the Inflation rate over time and at any point in time make sure that you should be receiving enough, so that it is atleast able to service the running costs.

There are certainplans available in the market which provide an option to increase your sum assured value. So, you may take a relook at your current needs and readjust the sum assured. The amount of increase in sum assured that you can opt for cannot be indefinite, but is generally restricted to three times the original sum assured value that you opted.

2) Tenure of the plan –

Most of the plans provide life cover up to the age of 60, while some may offer cover up to the age of 70. You may even opt for a plan with shorter term duration like 10 or 15 years. The important factors that would determine the tenure of your plan are existing age of the insured, current savings, earnings growth and whether you still own a house or not. Quite a few people are lucky enough to accumulate enough savings at a young age, which could probably sustain for their life time, but not everybody is so lucky, hence they would need to make sure that at any point oftime, the sum assured value that is received is able to sustain the family costs and lifestyle.

3) When to buy a term plan -

By choosing to buy a term plan at a young age, you get the benefit of paying lower annual premiums, though it may be for a longer tenure. Lower annual premiums are especially important when you do not have a very comfortable family income.