What is a Term Plan?
In India, there are various types of life insurance policies, such as a term plan, endowment, money-back or whole life insurance, ULIPs and pension plans.
Features of Term Insurance Policy
Term insurance policies are pure life insurance policies. The entire premium goes towards the cover amount. Some features of the term plans are as follows:
Term policies offers life insurance cover over a certain period of time.
If the insured dies during the term, then the nominee gets the entire sum assured.
If the insured survives the term, then no amount is given to the insured or the beneficiary.
Premiums for such policies tend to be lower than for other life policies because the entire amount goes towards the cover, unlike other policies where a chunk goes towards investments.
You can opt for a term of your choice.
How to Choose a Term Plan?
While shopping for a term insurance policy, you must keep in mind certain things.
Cover – A life insurance policy secures the financial future of your family, especially when you are no longer around. Decide upon an optimum cover, sufficient to meet your family's financial needs in your absence. Keep in mind the debts you have to pay, your children's education and marriage costs and any other liabilities that your family might have to face in your absence.
Claims Settlement Ratio – Always check the claims settlement ratio of a company before buying any insurance policy. You can also consult someone with a personal experience. Checking out customer reviews online is also a good idea.
Factor in Inflation – Always factor the inflation rate and its effect on future living costs and then choose the value of your cover.
Term – Opt for a term that outlives your service years so as to remain insured till your retirement years. You can also take two term plans. Take one at an early age and one a little later to enhance your cover.
Online or Offline – Online term plans tend to be 40 to 50 percent cheaper than their offline counterpart. You can easily calculate your premium through an online term plan calculator and buy a policy within minutes. You can also read customer reviews and view ratings on a policy before buying one.
Premiums paid for all life insurance policies are exempted from income tax up to Rs. 1.5 lakhs under section 80 C of the Income Tax Act, 1961.