If you have convinced yourself to buy a term insurance plan, possibly you may have come across several plans that claim to deliver myriad benefits. The wide availability of insurance products is usually a blessing but it can also work incredibly to confuse you. Even professional investors can sometimes face a hard time when it comes to selecting a perfect term insurance plan. In the past years, the insurance industry has gone through a major transformation. Many top-class insurance companies have introduced various term plans to fulfill customers’ distinctive requirements.
What is Term Insurance Plan?
It is the most elementary and conventional form of insurance. Term Insurance plans are fabricated to protect one’s life against mishaps by presenting a financial net to manage expenses if a policyholder is not around to take care of his/her dependents.
A term insurance plan encompasses a specific time period which is also understood as the plan term. If a policyholder dies during this term plan, his/her nominees will get the sum assured by the insurance provider.
The sum assured is a coverage amount that the policyholder agrees to give in case of his demise. If the term plan completes the fixed term assigned to it and the policyholder is still alive, the plan will acquire maturity. After the maturation of a Term Insurance plan, an insured will not reap any benefit. This is the case with a pure term insurance plan that comprises death coverage.
Types of Term Insurance Plans
Term insurance plans are categorized into 6 different types. Each type has its own benefits and spectrum of coverage. Let’s discuss each one of them briefly.
Level term Plans: It is the most rudimentary form of term insurance where the sum assured remains the same throughout the policy tenure and the nominee will be eligible to receive the benefits if the policyholder passes away.
TROP (Return of premium) Plans: Contrary to level term plans, these plans entail maturity benefits wherein the policyholder is eligible to get the total premium if he/she survives the policy tenure.
Increasing term plans: These plans allow policyholders to increase the sum assured yearly during the policy tenure while preserving the premium amount at the same value. The premiums of these plans are usually higher.
Decreasing term plans: Contrary to increasing term plans, the sum assured tends to decrease on an annual basis during the policy tenure while preserving the premium amount at the same value. If you have taken a massive personal or home loan or you are currently paying an EMI, these plans will work incredibly for you.
The sum assured keeps decreasing at your chosen pace with the payment of EMIs. It also lowers the total loan amount.
Convertible term plans: These plans comprise an option that authorizes a policyholder to convert these plans into any other type of plan hassle-free at a future date.
What to Remember While Buying Term Insurance Plans?
You need to make sure that the nominee you choose for your policy knows how to spend every penny judiciously. The money that you can get from your insurance plan can help your family members to sustain a good life even if you are not around to take care of them. Make sure that the nominee knows how to manage sum assured well.
Another important factor to bear in mind is temptation. Sometimes a person begins to dwindle after getting an enormous amount. His/her desire to spend money recklessly rises because temptations begin to surpass rationality. Remember that the claim amount corpus will only help you to evade financial anguish if you know how to manage it. Erosion of financial corpus can invite financial distress into your life.
The Final Verdict:
Undeniably, nobody wishes to face uncertainty at any point in life but one cannot deny the fact that uncertainties are part of one’s life. You cannot control what life throws at you but can definitely control the wrath of life’s eventualities. If you don’t have time to visit the insurance provider’s office to buy one of the term insurance plans, you can get it online. Currently, insurance companies are focusing on giving the best experience to the customers. They are making their websites user-friendly so one can buy the best insurance plan without worrying about any glitches.