Term Insurance Plans

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Term Plan-Think Insurance not Investment

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You may have some money with you and are looking for a safe insurance or investment option. With various options available in the market today, you may be in a dilemma as to which is the best one for you and your family. You want an uncomplicated option that provides your family with the sum Insured should you die during the insured period. In that case, you must definitely go in for Term plans, which are basically insurance plans providing you basic Risk cover with low premiums.

Term insurance plans provide you protection for a specific period of time. In India, it is typically from 5 years to as long as 30 years. You are paid a benefit only if you die during the Policy term, and there is no Maturity benefit otherwise. The premiums are low for term plans because there is no savings element, and if nothing happens to you during the policy period there is no maturity benefit either. Level term products are one of the most popular insurance plans available in the market today.

Term plans are therefore insurance plans with the following features:

1.You can get them at very low costs, giving you basic Risk Cover with low premiums. They are not an investment option that will provide you good returns after its maturity period.

2. If the insured dies during the tenure, the Death Benefit will be paid to the beneficiary.

3. After the relevant period expires, Coverage at the previous rate of premiums is no longer available. You must then go in for further coverage with different payments or conditions.

4. If you stop paying the Premium during the tenure, the policy will Lapse after a 30 day grace period.

5. When you purchase a level term life insurance policy make sure that you are aware of the guaranteed premium period.

6. Some Term Insurance policies can be renewed when you reach the end of a specific premium period. However, the premium rates increase at each renewal date.

To avoid frauds, the insurance companies will also look at your income to make sure that the amount of cover you are looking for is proportionate with your earning potential. In India, normally if the insurance cover sought along with any existing cover is up to 10-15 times your annual income, it should be possible to get this without any hassles. Again, most term insurance policies require that you provide evidence of insurability during renewal too to qualify for the lowest rates.

Nowadays, there are also term plans available in markets that give maturity benefits at higher premiums. Therefore, there are two types of term plans available in the markets now, which are:

Pure Term Plans, which gives only Death benefits,

Term Plans, which gives Death benefits or Maturity benefits (Premium Paid minus taxes)

Pure term plans and term plans give you high returns for the lowest premium amount during their term. Term Plans are thus the most ideal option as they not only have comparatively low premiums but also release your money which you can then invest in other places. They provide much higher returns and coverage than other investment-cum-insurance options, which provide low coverage even after deductions for life cover are made from the premium.