Today lets jump on to Term plans.
What are the term plans?
Term insurance is a type of life insurance plan which provides coverage for a certain term, the term is generally fixed and predefined say 10 years, 20 years 35 years, etc. If the insured dies during the time period specified in the policy and then a death benefit will be paid to the nominee who is mentioned by the insured during the time of purchasing the policy.
Why do people buy Term insurance Plans? Benefits associated with term insurance plans.
Term plans are cheaper compared to traditional endowment plans as they are pure insurance plans and do not have any investments associated with them.
Term plans are simple to understand as they don’t have investments associated with it.
Also, you get Tax benefits under section 80C for premiums paid for term insurance plans.
If you buy term plans online the premium is less compared to the offline plan.
Term plans do have the following limitations
If you opt for a term insurance plan at an elderly age you might end up paying more premium. The premium for term insurance steeply increases with advancing age.
At older ages, say beyond 60 or 65 it becomes difficult to buy term insurance as most insurance companies do not offer it beyond these ages.
No surrender values or loans are available under term policies.
Wealth creation is not possible through term insurance as they are pure insurance plans without any investment benefits.
Is term insurance plan best for you?
Yes if you fall under the following criteria’s / situation.
Your income is less while your future needs and liabilities are more. Term plans are cheaper.
If you have taken a home loan.
If you are very uncertain about the future be it your job or business or even healthwise.
If you are good with your investments. If you invest regularly in Mutual funds, SIP’s, or even direct investment in equities then your wealth creation part is taken care and term plan takes care of the uncertain future.
How can you find the best term insurance plan?
- Look out for multiple options on an online comparison website.
- Select the one with the highest term and lowest premium.
- Look out for claim settlement ration and credibility of the company.
- Buy the one which best suits your needs and situation.