Best Deals on Term Plans

A term plan is a kind of pure life protection plan which remains valid only for a certain term or pre-decided time span.

Basically, there are two kinds of Life policies.

  1. Life Policy

The first type of life policy is a “whole” life policy. This means that the policy will remain in force for the whole life, without changing. In short, this policy will be in action as long as the person covered under the policy, is alive and as long as the premiums are being paid.

  1. Term Plan

The second type of policy is, “term”, policy. This means that the policy will remain in force for a term only, and no changes can be made for a specified period of time. For example, 5, 10 or 20 years, or till the covered person reached the decided age.

Well! Both the types are designed for different purposes and have their different pros and cons.

The policy term is designed to cover your life only for as long as you want the coverage or it is needed; for example, a credit life policy on a loan. If you finance a car and purchase credit life, it will cover the amount of the unpaid balance only for the term of the loan, because you won’t need it after you have paid it off.

Apart from this, there are some term policies that cover you only till a certain age. Also, you can avail policies that are “guaranteed renewable”. You will see that they are generally term policies that can be renewed at the end of the term but at whatever premium is in effect at that time, for whatever age you are at the time of renewal. Also, let us tell you that not all policies are renewable, so you’ll have to check it while getting a policy for you.

When it comes to the price, term policies are comparatively less expensive than buying a whole life policy, but again most of them expire even before the life being covered.

Yes, whole life policies are expensive, but depending on the age at which they are purchased, they usually seem more economical in the long run. As the premiums never go up, the benefit never goes down.

Importance Of Different Term Plans In Your Life

Given below are different term plans and their importance in your life:

  1. Level Term Plans

The level term plan is the most basic and simple form of term insurance. In this plan, the sum assured remains the same throughout the policy tenure and benefits will be paid to the nominee on the death of the life insured during the active policy term.

  1. TROP (Return of Premium) Plans

Unlike the above term insurance, this plan comes with a mutual benefit wherein the total premium paid will be returned to the life insured even if she/he survives the policy tenure.

  1. Increasing Term Plans

In increasing term plans, the policyholder can easily increase the sum assured on an annual basis during the policy tenure, without changing/increasing the premium amount value. Well! Let us tell you that due to this option, the premium for these plans remains higher than other term plans.

  1. Decreasing Term Plans

This is the exact opposite of increasing term plans; the sum assured keeps on decreasing every year in these plans to meet the decreasing insurance requirements of the life assured.

Trick To Know While Selecting A Term Plan

Choosing a perfect term plan is a mindful decision. So, here are a few points that you should consider while buying term plans:

When it comes to financial literacy, most people fail, especially in money management.

For example, suppose something unwanted happens to you, and your nominee decides to invest all the money that he has got from your term plan in one go. Now imagine that a friend of your nominee advises him/her to invest all the money in chit funds and he/she does so; then eventually the nominee loses all the money.

Well! I am sure you would never want that to happen, right? After all, you saved that money to take care of your family’s expenses in your absence and not for the chit fund; so it should be managed well.

So, inform and educate your nominee and make sure that he/she is financially literate. Tell him every detail of the term plan you have invested in and even what to do with the sum assured.

The second important thing to consider is temptation: the temptation to overspend. Not everyone knows how to spend money wisely; and when such a person gets too much money in one instalment their desire to overspend rises. In her/his shopping spree, he/she may go overboard and spend on the things that may not be affordable for her/him in the long run. And this can further lead to erosion of the claim amount corpus and can eventually result in financial hardships for your family. So, choose your nominee wisely.