What is a Term Insurance Plan?
A term insurance plan is a type of life insurance plan that gives you life coverage for a predetermined tenure (policy term). If you (in case you are the life insured) pass away during this time, your nominee gets a fixed amount of money called the sum assured. Term insurance plans are cost friendly as they are pure protection plans . If you outlive the term, you do not get any money back, unless you choose returns of premium plan You can also add riders which are add-ons like accidental death benefit rider, critical illness benefit rider, waiver of premium rider, etc., to your term insurance plan at an additional nominal premium.
How Do You Choose a Term Insurance Plan?
When thinking about how to select a term insurance plan, you must align your needs with what the plan offers. Here are some easy steps to help you decide on the term plan:
Assess your needs
Start by thinking about your family. Who depends on your income? Do you have children or parents who need help? List all your monthly expenses, loans, and future goals like education or marriage. This will help you know how much cover you need. For example, if your family needs ₹50,000 each month, the cover should be enough fulfilling their financial needs in the future in your absence.
Do your research
It is helpful to review different plans before making a choice. Check what each plan covers, claim settlement ratio (CSR) of your chosen insurance company, any extra benefits, and the term insurance cost. This will help you select a plan that fits your needs and budget while providing suitable protection.
Keep your medical history and overall health in mind
If you have any health problems like diabetes or high blood pressure, you must inform the insurance company. Your health can affect the cost of the plan and approval. Some plans may need a medical test. Before choosing a plan, you should consider all of these factors.
Match your goals with the plan features
Consider what you want your term insurance plans to cover. Make sure the features of the plan align with your financial priorities and the needs of your family. You should assess what the future expenses that your family might struggle with in case of your demise are. After all, you would never want your loved ones to compromise on their dreams or struggle through finances. Thus, you will be able to choose the best-suited plan for you.
Keep the future cost of living in mind
Term insurance plan for your loved ones helps them in the long run. Remember that prices and costs usually rise due to inflation. So, the amount of cover you choose now might not be enough after a few years. It’s a good idea to calculate all future expenses while factoring in inflation, so your family stays financially secure even as the cost of living goes up.
Consider the premiums
The premium is the amount you pay to keep your term insurance plan active. Make sure this amount fits comfortably within your budget. It’s important to find a balance between coverage and affordability. Also, check if you can pay the premium in a lump sum or regular payout: monthly, quarterly, half-yearly or annually, whichever suits you best.
Take a timely decision
Term insurance premium tends to increase as you get older. Also, health problems that may develop later can make it difficult to get good coverage. To avoid any such circumstances, it is advisable to buy a term insurance plan at an early stage.
Conclusion
Term insurance is a life insurance plan which provides financial support to your family after your unfortunate demise . It is important to plan well, look ahead to the future and find a plan that fits you. There are many different plans available today that often offer life coverage. Whatever you decide, just remember that the best plan is one that fits your financial needs and budget.
FAQs
Is purchasing a term plan worth it?
Yes, buying a term plan is useful. It gives your family financial protection after you pass away. This money helps them pay for daily needs, rent, school fees, or loans.
What factors affect the term insurance premium?
The premium is the money you pay for the plan. It changes based on factors like your age,health, job, habits (such as smoking and alchohol), sum assured, tenure, payment frequency, etc. If you are young and healthy, the cost can be lower. If you smoke, drink, or have health issues, premiums might be higher.
When is the right time to purchase term insurance in my life?
The best time is early in life, when you’re young and healthy. Premiums can be lower, and coverage is easier to get.
Should I purchase a term plan if my employer already provides life insurance coverage?
You can buy a separate term plan because employer coverage ends if you leave the job. Also, it may not be enough for your family’s needs. A personal term insurance plan ensures continuous and adequate protection according to your own financial needs.
How to benefit from tax while purchasing term insurance plans?
Premiums paid for a term life insurance policy qualify for tax deductions under Section 80C if you choose the old tax regime. Additionally, the amount your family or nominee receives after your death is tax-free under Section 10(10D). This helps you save on taxes while ensuring financial security for your loved ones.
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