Term Insurance Plans

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Things to Know About Term Insurance Plans

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Things to Know About Term Insurance PlansTerm insurance is one of the most popular ones among the various life insurance products available in the market. This insurance provides life insurance to the policy holder for the policy term. If the policy holder dies during the policy term, the nominee or beneficiary mentioned in the policy gets the sum assured.

The main purpose of a term insurance plan is to safeguard the interest of the insured’s family after him. All the funds in a term plan are used to provide protection and cover the risk, and there is no investment criterion which makes these plans cheaper. Under this policy, the sum assured is handed over to the nominee and no interest or returns are given on the policy. In the event of the expiry of the policy tenure, the insured does not get any maturity benefit. However, now there are some insurance companies offering maturity benefit in terms of premium pay back at the end.

Some important things about term insurance policy that you must be aware of are:

Essential Factors to Check Before Buying

Following are some of the points that should be checked before buying a term insurance policy:

  • The financial requirements should be assessed
  • Reputation of the insurer and Claim settlement ratio
  • Plans of different insurers should be compared
  • Coverage benefits and inflation in premiums, if any
  • Rather than offline, online plans should be bought
  • Features and not cheaper premium plans should be the deciding factor

Tenure of the Plan

Tenures for a term insurance plan can range from 5 to 65 years, depending on the age of the insured. The entry age is usually 18 years and it can be bought till 65 years. When buying a term insurance plan, one must choose the plan which gives the highest term as this ensures the coverage is enjoyed for a longer period.

Types of Plans

The main types of term insurance plans are:
Level Term: This is the basic term plan which pays the sum assured in the event of the death of the insured.
Decreasing Term: The sum assured under this plan reduces every year by a fixed percentage.
Increasing Term: The sum assured here increases every year by a fixed percentage
Monthly Income Plans: Under these plans, a part of the death benefit is given in parts on a monthly basis and the balance is paid as a lump sum to the nominee.

Return of Premium Plans: This is the only term plan which offers a maturity benefit. In these plans, at the
time of maturity of the policy, the policy holder receives the total premiums paid.

Riders

For increased protection, one can opt for riders which are options for additional coverage. To add a rider to the policy, one needs to pay more premium. Some of the most common riders offered by insurance companies are: 
Accidental Disability or Death Rider: An extra benefit is given under this rider in case of a disability or death due to an accident.

Critical Illness Rider: Under this rider, certain critical illnesses are covered and on the diagnosis of any of these, a lump sum is given to the policy holder.
Waiver of Premium Rider: If one opts for this rider and during the policy term, the policy holder becomes disabled, all the future premiums are waived off.

How to Buy

There are two ways to buy a term insurance plan:
Offline: These plans are sold by brokers and agents. The insured ends up paying a slightly higher premium if he decides to buy offline plans as premium includes commission payable to the agent or intermediary.
Online: In this case, the insurance company sells the plans directly and thus, the premiums are lower. There are many financial aggregators as well today, who help buyers to an informed decision by providing a platform to compare various plans side by side.

Conclusion

A term insurance plan is a perfect way to ensure financial stability and security for your loved ones as it fulfils the needs of income replacement. For anyone who has dependents, buying a term insurance makes a lot of sense as with this you can secure your family and live stress-free.