An insurance policy is the best way to have monetary assurance for the future, and the reason why people consider buying term life insurance. Several types of plans and policies are available on the market, of which the term insurance policy is the most basic and traditional one there is.
Life insurance is a contractual agreement between an individual and an insurance company for a certain period, the policyholder pays a premium, and the insurer pays the beneficiary a solid amount at the end of the term.
This insurance plan only offers risk coverage and protection through a death benefit. Several plans are available that provide an additional savings system.
A basic plan will not have the option of maturity or survival benefits if the policyholder outlives the term. But there are premium plans and Term Return of Premium plans (TROPs) available, which will refund the policyholder, the invested amount, or offer a maturity benefit, all the more reason to buy a term insurance plan.
Term insurance plans have lower premiums compared to other insurance plans, and the reason is that it doesn’t come with an investment option.
Furthermore, some term plans can be bought without having to go through a medical examination. If the applicant is younger and leads a healthy lifestyle, he/she can buy a plan without requiring a medical exam.
These are the various types of term insurance plans available in India. They are:
A term plan can be bought either online or offline. Generally, buying an insurance plan online is cheaper than buying it offline, or through an agent.
Before buying a plan, the following things need to be done:
Typical features of a term life plan:
Minimum term period- 10 years
A comparison of the various types of life insurance plans available:
|Plans||Term plan||Whole life insurance||Endowment plan||ULIPs (Unit Linked Insurance Plan)||Money-back plan|
|Tenure||10-40years||20 years (of premium payment)||30 years||20 years||20 years|
|Assured Sum||Up to Rs.1Crore||Rs.3 Lakh||Rs.10 lakh||Rs.2 lakh||Rs.5 Lakh|
|Premium Range||Rs.6800- Rs.10,500 p.a||Rs.10,000- Rs.15,000 p.a||Rs.20,000- Rs.25,000 p.a||Rs.20,000||Rs.20,000- Rs.25,000|
|Upon completion of term||Premium not paid back Payback options available with certain companies||Survival benefits offered||-Assured sum +profits||-Assured sum +profits||-Assured sum +profits|
|Payout||Death benefit Monthly payout (some plans)||-Partial withdrawals -Maturity benefits||-Maturity benefits||-Maturity benefits||-Survival benefits -Maturity benefits|
|Savings/investment||N/A||Yes||Yes||With risk investment||Yes|
|Simplicity||Best||More complex||More complex||Most complex||Fair|
The basics to keep in mind with term insurance are:
Claim Settlement Ratio: Always go for an insurer that provides a higher claim settlement ratio. A claim settlement ratio is the percentage of insurance claims that that company has settled with its policyholders
Payout options: Whether only a lump sum death benefit is applicable or a monthly payout option is possible
A1. Since the times we are living in are so uncertain, it is always advisable to buy a term plan to assure the future of loved ones and family.
A2. Documents that are proof of age, proof of identity documents, address proof documents, any medical documents that are asked for, and salary proof, if it is required.
A3. The policy can be revived within the revival period offered for it, by payment of premium along with a fine amount.
A4. Yes, it can be stopped after the first two years of premium payment completion.
A5. It is possible in many cases. It can be paid monthly, quarterly, half-yearly or annually, according to the IRDA.