Common Features of Term Insurance Plans
Updated On Jul 15, 2021
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Preparing for the time when you won’t be around your loved ones through a term insurance plan will save your family from any financial strain caused due to reduced or no income generation if you are the sole breadwinner of the family. Thus, you should atleast have a good knowledge of the most common and basic features of a term insurance policy. The following article focuses on providing you with such information to help you choose the best policy for yourself.
Common Features of Term Insurance Plans
Here is the list of salient features of a term insurance policy.
Purchasing a term plan is the first step in financial planning. It protects your family from debts and loans and helps them maintain their existing standard of living by financially insuring them. Moreover, as the insurers only pay the death benefits to the beneficiary if the life assured dies within the policy duration, the plan is quite affordable for the masses. Furthermore, compared to other life insurance products such as whole life plans, unit-linked insurance plans or money back plans, the premium for a term plan is the cheapest. For the record, the premium for a term plan includes mortality charges as well as the cost of basic policy management.
2. Various Premium Payment Modes
Premiums can be paid annually, semiannually, quarterly, or monthly with term plans. Aside from regular pay premiums, certain term insurance policies include single pay or limited pay premium options. Such flexibility allows policyholders to select the best premium payment choice for their budget and convenience.
3. Easily Accessible
Purchasing a term plan is simpler than purchasing other types of life insurance or financial instruments. A term plan's framework is so simple that you won't have to worry about what returns the plan will provide, where the insurer will invest the money, and so on. It just requires you to determine the suitable sum assured based on your financial goals, way of living, financial debts, and other factors. Moreover, you can also use online calculators to compute the correct sum assured amount.
4. Return Of Premium Option
Some individuals are hesitant to invest in pure term insurance policies since they do not provide a maturity benefit. However, a term plan called a term plan with a return of premium provides a maturity value equal to the return of all paid premiums if the life assured lives to the end of the policy duration. However, it must be noted that these plans are slightly more expensive than standard term insurance policies because they provide both death and maturity benefits, whichever situation happens first. Moreover, in the case of a term insurance policy with returns of premiums, the payment at maturity varies from plan to plan offered by different insurance providers.
5. Various Payout Options
In the event of a death claim, all term plans provide a lump sum payout to the nominee. Moreover, an option of partial lump sum amount can be availed. Under this, a part of death benefits are paid as a lump sum, and the remaining amount can be delivered as monthly/yearly income. The remaining amount is payable as a regular payout in the form of a monthly payment, which will assist the family in combating the financial crisis caused by the death of an earning member.
It's essential to consider your financial demands and choose a term plan with a sufficient sum assured. Moreover, by being familiar with the basic components of a term insurance plan, you can purchase the right policy for your needs, budget, and financial goals. Furthermore, it is believed that term insurance plans purchased at a young age are the best financial move you can make because they will help you achieve larger financial goals by taking the constant financial worries off your shoulders.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.