A Term Insurance is a kind of life insurance policy, where a certain amount is specified to the nominee which would be received on the demise of the policyholder. It is cost effective life insurance plan, which is considered to be quite useful due to financial compensation being offered to the dependent family members. A Term Insurance policy is vital as it offers a comprehensive life protection coverage to the family members of the policyholder in case of a sudden demise.
Reasons to Choose a Term Insurance Plan
Mentioned are the benefits of term insurance due to which one should opt for the policy:
- Financial Protection
It provides a sense of financial protection which might be required in case of an unfortunate demise and income being compromised. The amount of coverage will thus secure the financial future of the family in this scenario.
- Affordability
They are considered to be affordable due to the low amount of premiums, even lower than life insurance policies. They do not have fund management charges.
- No Risk Involved
As the term insurance plans are not market-related, they do not include any returns over and above what was chosen at the time of purchasing the policy. Hence, there are no market related fluctuations. It means the sum assured remains the same unless there is a factor of inflation.
- Flexibility of Customization
It also includes customization of your term plan with the help of additional riders as mentioned here under:
- Critical Illness Benefit
Insurance companies provides a list of critical ailments, where in any case you get diagnosed with any one of those, and the company will provide you a lump sum amount. The amount you receive will be deducted from the coverage amount (i.e. Accelerated Critical Illness Benefit) or over and above the base amount (i.e. Critical Illness Benefit).
- Waiver of Premium
This means, you can get a waiver of premium to be paid in case you are diagnosed with a critical illness or is affected by total and permanent disability. It means you are not required to pay the premium left to keep your policy alive.
- Accidental Death Benefit
In case any total and permanent disability occurs because of an accident, you will receive a lump sum amount from the insurance company in the form of monthly payments to replace your income in order to compensate your routine expenditures.
- Accidental Total and Permanent Disability
In case of total and permanent disability, which occurs because of an accident occurs and income source gets affected, a lump sum amount is received from the insurance company. It can also be in the form of installments which is a compensation for your routine expenditures.
- Increasing or Decreasing Cover
An increasing cover rider came into existence to meet the need of unstable financial requirements of a family, like an addition of a family member to the family. It is also considered to be an inflation based boost in the amount covered, where the amount covered increases by a percentage or amount over the tenure of the policy.
- Terminal Illness Benefit
In an event of terminal illness ailment is diagnosed, which leaves you in a dilemma of whether you keep all your savings for your family, or spend the same on your treatment, or rather use it to fulfill your wishes. So, in this case the insurance company offers you with the lump sum amount that can be used at your will.
Factors Influencing Term Insurance Cover Amount
Provided below are the factors influencing the term insurance coverage amount:
- Number and Age of Dependents
The more the number of dependents in a family, higher is the coverage amount. Also, the younger the dependents are, higher will be the amount to be covered.
- Policy Tenure
It is considered to be the number of years or the age of the policyholder till the time he/ she would remain covered under the policy.
- Monthly Expenses
One should consider the amount of monthly expenditure incurred, like children fees, medical expenditures, groceries, travelling costs, utility bills, etc. to analyze whether premium to be paid can be afforded or not.
- Inflation Factor
Though the amount of coverage cannot be altered during the tenure of the policy, but you can opt to increase the coverage amount with the help of additional riders.
How to Use a Term Insurance Calculator?
Provided below are the steps to use a term insurance calculator:
Step 1:Provide your age.
Step 2:Provide the tenure for which policy is required.
Step 3:Provide the total of your monthly expenditure excluding loan or investments charges, if any.
Step 4:Provide your monthly loan installments that are outstanding.
Step 5: At last, click the tab “Calculate” to get the coverage amount.
How to Make Term Plan Insurance Premium Payment
The two options available to make payment towards the Term Plan Insurance Premium:
- Monthly Payment
Under this method, the premium amount is paid in monthly installments, this method is suitable to those who want to avoid a lump sum payment.
- Annual Payment
Under this method, the premium is paid once every year, suitable for those who want to avoid hassle of monthly payments.
The term insurance premium can be paid in either of the two modes:
- Online through UPI, debit card, credit card, internet banking, etc.
- Offline by visiting branch through cash, debit card, credit card, UPI, etc.
Conclusion
The main objective of term insurance plan is to ensure the financial security in an event of sudden demise involving death benefit. The most suitable plan for a policyholder is the one which can be customized as per the requirements i.e. depending on the lifestyle, needs of the family, debts, or liabilities, or any other urgent needs. Also, you should consider the capacity to pay the premium amount on time and avail the coverage amount.
