The family of Mr. Amid was left bereaved when he lost his life due to a sudden heart attack early in the morning. He was only 65 and the sole bread earner of the family and used to make his financial decisions himself. Though the emotional loss incurred to the family was insurmountable, the family was relieved when they found that Mr. Amid had made enough financial provision for the family to cope up with a situation like this.
Did you know how Mr. Amid managed that?
Mr. Amid invested in a term insurance plan when he was working and this insurance plan came to his family’s rescue when he suddenly died that morning. The family made the claim to the insurance company who promptly paid the life cover amount to the nominee of the policy, Mrs. Amid.
As we can see from the above example, a dire financial crisis was averted due to the prudent decision taken by Mr. Amid which protected the family financially.
Sounds like a nice story, but did you grasp the crux? It was a term insurance plan which played the hero and saved the family from the financial crisis. Though the loss of an individual’s life cannot be compensated by any amount of money, the term insurance plan aptly compensated for the financial loss which otherwise would have accrued.
Does your story too have a term plan hero? If not, you must have one, else the ‘unawareness about term plan’ villain might write a tragic end to your story! But before that, let us understand what a term insurance plan is?
What is Term Plan?
A term insurance plan is pure protection insurance plan which is taken for a specified period. During the policy term period, if the life assured dies, the sum assured is paid to the nominee. The sum assured is the amount of life cover which is taken at the time of buying the policy. The benefit under the plan is payable only if the person insured dies. If the plan completes the stipulated term and the life assured is surviving then the plan matures and no benefit is paid.
Therefore, we can conclude that term plans are pure protection life insurance plans which provide coverage against the risk of death.
The common features of a Term Plan
There are some common features of the term plans as given below irrespective of the different variant that it might offer to the policy holders.
- Nature of the plan
Term plans are traditional life insurance plans which are not linked to market returns and they provide only a fixed benefit, i.e. payment of sum assured in case of unfortunate death of the policy holder.
- No bonus payment
Term plans are non-participating plans and do not pay any kind of bonuses or maturity benefits unlike other traditional plans like, endowment or money back plans.
- Plan tenure
Since these plans are designed for life protection purposes only, the tenure offered under these plans are usually long. A maximum of 30 or 35 years can be opted as the coverage term under term plans or life coverage till age 70. Some Companies, however, offer coverage till age 75.
- Death benefit
Normally, term plans pay a lump sum benefit equivalent to the life risk cover, in case of the life assured’s death. Some term plans, however, returns the premiums paid in case the life assured survives till end of the policy term.
Some insurers have also launched plans wherein the death benefit is paid in monthly instalments post death of the life assured, to the nominee for a specified tenure. Thus these plans endeavour to provide regular income to the insured’s family which helps meeting day-to-day expenses.
- Buying channels
Term plans though sold by all the sales channels like, Life Insurance agents, brokers and banks, it has become more popular as prospective buyers are buying the term plan online due to the low cost. You can visit the insurance company website and buy the term plan with a few clicks and pay the premium online.
The advantages of term plan
As you know, term plans are pure life protection plans and therefore it focuses only on the core of the insurance concept. What is the premium and what is the quantum of the life insurance cover.
- High Sum Assured levels
The maximum amount of life coverage or sum assured that you can opt under a term plan is limitless. If you can pass through the policy underwriting norms of the company, you can avail very high levels of sum assured. Whether coverage you want, say Rs. 50 lakhs, Rs. 1 crore or Rs. 5 crore, a term plan would allow you this coverage subject to your financial underwriting.
- Lowest premiums
The term plans are darling of the policy holders when it comes to choosing a high level of life coverage as the term plan premiums are the cheapest compared to any kind of life insurance policies. No other plan of life insurance can promise such high levels of coverage at such low rates of premiums.
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