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Life is uncertain and none of us are sure what the next moment holds for us. But in our own way and style all of us keep attempting to minimize the impact of unpleasant and unforeseen situations in our life. Untimely or sudden death of the sole bread winner is one unpleasant situation which can have drastic consequences for the members of the family who are left behind. The emotional trauma together with the financial distress can take a toll on the peace of mind of the family members. Nobody would ever want to see his family members and dependents in such a situation and one of the ways to circumvent such circumstances is to buy Term plan.
By buying a Term Insurance one can be Assured that family members and dependents do not have to face such a depressing condition. A term plan is a plain vanilla insurance policy. It pays to the nominee the Sum Assured guaranteed by the Policy if the Policyholder were to die during the policy term. Term plans are available for various tenures. The tenure decides for how long from the date of initiation of purchase of policy the Risk cover will be provided. Most term plans offer risk Coverage till the Insured reaches the age of 65.
A term plan is more assuring than other formats of insurance policies sold by insurance companies. I would suggest that before you buy a unit linked insurance plan (ULIP) or an Endowment Plan make sure that you have a term plan before that. A term plan is more important than an endowment plan or a ULIP.
The fundamental reason we all buy an insurance policy is because we seek financial protection for our family. Investment is only a secondary reason. A term plan fulfils the basic purpose much better than an endowment plan or a ULIP.
It is fair to assume that the amount of Premium that an individual can afford to spend annually towards insurance policies is limited because of limited amount of savings that are available. If you think that the amount of risk coverage that your family needs is 50 lakhs, there is no reason that you should compromise on this number.
If you choose to buy the same amount of insurance coverage using a ULIP or an endowment plan the amount of premium that you would have to spare annually would be somewhere close to Rs 5 Lakhs. I would say that majority of people would be simply taken aback with this number and would never think of buying an insurance cover.
But if you choose term plan instead the amount of premium that you would need to spare annually would be just a few thousand rupees. The difference in the amount of premium is essentially because a ULIP or an endowment plan invests most part of the premium amount in equity or debt while it reserves only a small part of the insurance premium towards providing risk coverage. The entire premium that you pay for a term plan is utilized to provide insurance coverage. Besides, you also save money on several other accounts like fund management charges, policy administration charges and premium allocation charges. All these charges put together are a significant drain on the value of the premium you pay to the insurance company.
Thus, you can see that a term insurance has its own importance and it remains the ideal choice for those who buy insurance policies primarily for risk coverage. Besides, a term plan being uncomplicated in structure it is easier to choose term plan. You can simply log on to an online comparison site and choose term plan that offers you the highest sum assured and maximum tenure for the minimum premium.