When it comes to insurance, the general population is usually split into two categories. There is one school of thought who buys standard insurance plans because someone in the family has them or has recommended them. Then there is the other school of thought who feel that buying a term plan or any insurance for that matter is not their cup of tea.
It is usually the complexity of a standard insurance plan that drives the people from the second school of thought away. Irrespective of which group you belong to, there is some good news. There exists an insurance plan that existing policyholders will easily understand and even people new to insurance will cherish. It is a term plan.
A term plan online is the simplest insurance policy that you can buy with your money in the current day and age. Why simple? Well, you as a policyholder must pay a certain amount of premium to the insurer. In return, the insurer will offer a sum assured which will come into effect if a policy holder loses his/her life. That is how simple a term plan is.
Unlike several other traditional insurance plans, there are no savings or investment components that get utilized from the premiums that you pay. The entire premium is utilized to offer you the maximum possible life cover.
It is because of this aspect, lack of savings or investment components, which keeps the premiums of the policy down. In fact, it is one of the most affordable insurance plans that you can buy. If you are on the lookout for a plan that can offer you the most life coverage by paying nominal premiums, a term plan must be on your radar.
Different Term Plans Available
Ever since their inception into the market, there have been several changes. To keep up with changing times and demands insurers have come up with smarter and more efficient versions of term plans. Thus, there are no surprises that you will be able to choose from a few different types of plans as far as a term plan is concerned.
- Term Plan
A standard term plan is the one that we have discussed above. A policyholder pays a certain premium and in return, the insurer offers life cover. If the policyholder loses his/her life during the tenure of the plan, the insurer will pay the agreed sum assured to the nominees of the policy. However, in the event that a policyholder outlives the policy, the insurer is not liable to pay anything.
- Increasing Term Plan
One usually buys a term plan for a longer duration of time. Some buy it for 15-20 years while others buy it for an even longer duration. In such cases, it can get a bit tricky to assess the sum assured in advance. To ensure that you or your loved ones are immune to such changes due to inflation and other factors, you can consider an increasing term plan.
As the name suggests, the sum assured of this type of policy increases at regular intervals. Thereby keeping you ahead of the curve and needs. In most of the cases, the sum assured of the policy increases on a steady and predefined basis of 5% to 10% on an annual basis. This lets you increase the cover of the plan by as much as 1.5 to 2 times of the actual cover.
- Life Stage Term Plan
Some insurers allow you to increase the sum assured of a term plan based on the occurrence of certain life events. For an instance, on your marriage, you can increase the cover by as much as 50%. Similarly, on the birth of a child, you can further increase the cover by 25%. The extension is only applicable to two children.
- Return of Premium
While a term plan is easy to understand, there is still a factor that pushes some potential policyholders away. In the event that a policyholder lives through the term, there are no financial gains. A return of premium term plan addresses that. Should you pick this plan and outlive the policy, the insurer will refund all the premiums that you have paid till date. The only thing that one needs to keep in mind is that the premium of this policy is slightly higher than a standard term plan.
Limitations of A Term Insurance Plan
One of the biggest limitations of a term plan is that there are no financial gains for a policyholder ever. If they die, their nominees receive the sum assured and if they outlive the policy, there are no financial gains. However, the massive life cover that they offer more or less makes up for it.