Smart Protection Plan: What is Term Insurance?

In simple words, a term life insurance can be described as a pure protection plan that is designed to offer financial protection to the policyholder and especially their loved ones. Typically, such a plan extends financial coverage in the absence of the insured caused due to their sudden death.

During such an unforeseen situation, the policy beneficiary or nominee can access the sum assured by the insurance following claim settlement. One key trait that distinguishes a term plan from another life insurance plan is the cost aspect. In other words, individuals can avail of term insurance at a relatively cheaper rate than other plans. However, individuals must know the key features and associated benefits to make the most of this term insurance plan. Subsequently, they should know the requisites to avail of such a plan.

What Should You Know About a Term Plan?

A term plan is cheaper than traditional life insurance

The cost of availing a term life insurance plan is lower than regular life insurance plans. In other words, individuals will pay a cheaper premium for a term plan than other life insurance and most savings plans. This feature makes them cost-effective and affordable for many individuals. It also allows individuals to mobilize savings to build a reliable corpus for their family members.

The advantage of starting insurance early becomes evident in terms of premium amount. To elaborate, insurance companies perceive younger adults to be less prone to age-induced illnesses or raise a claim within the first few years of the policy term. This makes them less risky than older adults. As a result, they are likely to avail of a high coverage amount at affordable premiums, which are lower than what older adults pay for their coverage.

Hence, getting the best term insurance early will help them build a financial protection cover and save a significant amount of money while doing so. Typically, each year we wait to get insurance our premium increases by 10%.

Lifetime protection is available

Term life plans are known to offer lifetime financial protection as they extend long-term coverage. This helps the policyholder to build a reliable financial safety net for their family that could help them tide over financial hardships during an emergency.

Tax benefits are applicable

Term insurance premiums paid in a year are tax-free. Under section 80C taxpayers can claim a deduction on their term plan premium, facilitating savings.

Add-ons are allowed

Term plans also allow individuals to increase the extent of coverage of their base insurance by including add-ons to it. Riders or add-ons help them to include additional coverage such as critical illness rider benefits, accidental death benefits, or premium waiver benefits. This will help them cover for risks caused during unforeseen situations and be prepared to account for the same. 

What to Pick A Suitable Term Insurance Plan?

To make a suitable pick individuals should be clear about a few things – their coverage needs and number of years they would need the coverage. Typically, it is suggested to factor in the financial cover that would be enough to safeguard the future of one’s family even in their absence to decide the suitable coverage.

The best tip to decide this effectively is to estimate one’s family’s monthly expenses for 15 years. On top of that individuals must factor in the inflationary rate and current liabilities.

In addition, they must add upcoming obligations to gain a full picture of their liabilities. However, listing all liquid assets and subtracting the amount to know the gap is suggested.

Once the amount of coverage is determined, individuals should proceed to find out the suitable term for which they would need the coverage. They should know that a longer term equals a higher premium. Generally, experts recommend picking a tenure by which one’s active liability is likely to get cleared.

When Should One Consider Buying a Term Insurance Plan?

While any adult individual can purchase a term insurance plan anytime they want, it is suggested to purchase a plan at a young age.  This is because younger adults can avail of high coverage at a very low premium as insurers perceive them as less risky than older adults. Typically, older adults are considered to be more prone to developing health disorders and raising a claim in the initial years of the plan.

Experts recommend getting insurance at an early age when they start their careers. Typically, individuals tend to have less financial burden and responsibilities at an early age. This leeway allows them to save more and mobilize the savings towards different financial avenues including insurance.

This approach would work best for those who have multiple dependents or aging parents. Similarly, individuals with working parents should consider getting insurance for a minimum of five years before the parents retire to build a financial safety net for them.

Also, individuals with multiple dependents must take a comprehensive insurance plan with high coverage like the best term insurance plan for 2 crore. This will help them to safeguard the future of the dependents and ensure their future needs are met before long after the insured is gone.

Hence, individuals regardless of their age should consider getting insurance the sooner the better to make the most of the plan’s benefits. However, all decisions should be made based on one’s financial standing and payment capacity so that they do not strain their budget.

What Do We Need to Get a Term Insurance Plan?

Individuals can easily buy term plan insurance by filling out basic documentation. However, it should be noted that the set of documents that individuals need to submit often varies among the insurance provider and type of plan.

Typically, individuals have to submit documents that support their application and serve as proof of their identity, personal details, and financial standing.

Individuals are often encouraged to check the entire list of documents to ensure hassle-free documentation and help Insurance providers that underwrite a policy.

Another document that individuals must be thorough about is the policy bond. This document is crucial for understanding the terms and conditions of the insurance and is also a key requisite when settling a claim. 

Term insurance is a key protection plan that acts as a financial safety net for individuals. In this regard, it is important to check the scope and limitations of the plan to ensure comprehensive protection during an emergency.


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