Term insurance plan is primarily a type of life insurance plan which offers death coverage to policyholders for a specific time or ‘term’ of years. Hence, in case of an untimely demise of the policyholder during the tenure of the policy, the insurer pays out a lump sum amount to their nominee.
It also offers pure life insurance coverage. In this article, let us have a quick overview of this plan. Some of the points which we will look at elaborately are:
- Types of term insurance plans
- Benefits of these plans
What are the types of term insurance plans?
This type of plan allows you to renew the policy once the tenure ends. It doesn’t require a detailed medical examination at the time of renewal however, you may have to provide a declaration of good health.
This allows the policyholder to exchange his term insurance policy for a cash-value policy. However, this may cause an increase in the premiums.
Here, the premium and coverage remain fixed throughout the tenure of the plan. Some plans may also offer you protection against terminal illness. In case of an unfortunate death or diagnosis of terminal illness, whichever is earlier, “Sum assured on Death” is paid and the policy ends.
- Increasing term insurance:
In this type, the end coverage increases with time. The percentage increase may vary from plan to plan. However, the premiums remain constant.
What are the benefits of term plans?
Some of the common benefits of this plan are:
- It offers financial protection to the nominee/s in case of the policyholder’s untimely death.
- Term insurance plan is available at affordable premium rates as compared to other life insurance policies.
- This plan offers the option of flexible payouts. Depending on what you choose, they are either paid monthly or lump sum or both.
- There are several options for tenures of the policy. You select it as per your requirement. Once the tenure is over, you can renew the plan.
- Term plans can be purchased both - online and offline.
- Many insurance companies offer riders along with the plan. These riders are designed to help you make most of the plan and also offer additional benefits.
Before you buy a term insurance plan, it is important to go through the terms and conditions of your plan thoroughly. This will help you make an informed decision. You can also seek professional help to know if the plan aligns with your goals. A financial professional will give you a deeper understanding of your plan, guide you to manage your portfolio and also give you tips on how to use a term insurance premium calculator along the way.