It is impossible to build a sound financial plan without buying the right life insurance policy. If you do not want your loved ones to suffer due to financial liabilities in your absence, purchasing a life insurance policy is the best way to ensure that. With the vast number of available choices, it is understandable if you are unsure whether to opt for a traditional plan or a term policy. Read on the learn about the benefits a term plan has over regular life plans.
Term insurance – An overview
Let us first understand what is term insurance plan. It is a type of life insurance policy that stays active for a specified period. If an unavoidable event results in the policyholder’s demise during that tenure, the insurer pays the death benefit to the nominees. Unlike other life policies, term plans do not include a maturity benefit or an investment option. Yet, it has become immensely popular due to its considerable coverage and economical pricing.
Here are a few of its plus points.
- Simple policy
One reason why a term policy has become a favorite option among Indians is its simplicity. It is a pure form of life insurance plan, offering the payout only in the policyholder’s unfortunate absence. If you continue to pay the premium timely, the insurance company will pay the sum assured to the nominees when the tragic incident occurs. It is a straightforward plan that does not require you to pay attention to the investment market or the surrender value.
- Affordable price
The cost of a term insurance policy is more reasonable compared to traditional life insurance plans. A general life policy often has maturity benefits and investment opportunities. This is why insurance companies charge you a higher premium for them. As the term plan only pays the death benefit, the premium is considerably inexpensive. You can lower the premium further by purchasing the term life insurance policy online. However, the policy offers a relatively large cover despite the low pricing.
- High sum assured
The purpose of a life insurance policy is to provide your loved ones with enough money so that they can achieve their financial targets in case you are absent. To ensure this, you have to leave them with a huge sum. This is where a term policy scores over traditional plans, offering a sum assured close to 60 times higher than regular life insurance plans.
For example, a traditional policy might offer you a sum assured of INR 2 lakh for a yearly premium of INR 20,000. On the other hand, for an annual premium ranging between INR 10,000 to INR 20,000, a term policy will provide your nominees with a sum assured of INR 1 crore. Hence, a term life insurance plan is the only policy that can ensure a comfortable financial future for your dependents.
- Fixed premium
Term insurance plans in India are available for a predetermined premium, which the insurer decides at policy initiation. This is significantly more beneficial to young people, as insurance providers offer them a low price compared to older policyholders. For instance, if you are aged 30 and purchase a term plan worth INR 1 crore that covers you until you turn 75, the yearly premium will be around INR 10,000. However, if you buy the same term policy at the age of 45, the yearly premium can be as high as INR 30,000. Hence, consider buying a term plan when you are younger to get a substantial cover at a low price.
Now that you understand how a term insurance policy can be more useful than regular life insurance plans, it is time to start looking for a plan that meets your family’s needs.