If you are interested in learning everything about the term insurance plan you are thinking of investing in, you must first learn the fundamentals of term insurance plans. Here is a beginner’s guide to help you understand every basic question you may have about term insurance plans so that you can choose a plan that is best suited to your needs.
Meaning of term insurance
Term insurance is a contractual agreement between the insured and the insurance provider that states that in the event of the insured’s death, the principal capital of the insurance will be paid as a lump sum amount to the family members of the insured.
Term insurance plans are very accessible and easy to afford due to their economic premiums. Moreover, you can also invest in an online term plan from a trusted and registered insurance provider.
However, there are many more facets of information you must learn about to understand term insurance completely.
Features of term insurance
There are many important features of any term insurance plan that you must consider. These features make each term insurance plan unique, thus you must know these features to determine the best term insurance plans for you. Here are some key features of any term insurance plan:
- Survival benefits: This is a concept that is true only in a few term insurance plans. It states that in the event that the insured does not die by the time the insurance plan is matured, all of the premium paid to the insurance provider, barring taxes, would be paid back to the insured.
- Policy tenure: Generally, a term policy plan can range anywhere from 5 to 10 years. However, many plans are also made to last 25 years to the insured’s lifetime. Therefore, you must choose a term insurance plan with a policy tenure that suits you the best.
- Renewable term plans: Renewable term plans allow you to renew your insurance plan each year. However, as you renew your insurance plan annually, the cost of the premium also increases. This is because the age of the insured also increases.
Types of term insurance
There are several types of term insurance plans your insurance provider can offer you. Let us take a deeper look into some of the most common term insurance plans provided and the differences between them below:
- Standard plans: The standard term insurance plans are the basic plans that act as protection that provide financial aid to the nominee of the life insurance policy in the event of the insured’s death.
- Group term insurance plans: A group term insurance plan is often offered as an employment incentive by many corporations. This is done to make sure that people in the corporation work efficiently.
- Term return of premium: The term return of premium insurance plan makes sure that in the event that the insured does not die or dies too early, financial aid is provided to the family. This is done to make sure that there is no financial burden on the affected family.
Advantages of getting a term insurance
There are several great advantages to investing in a term insurance plan. More than just giving money to the nominees of the insurance with the money invested by the insured, there are even more advantages you can enjoy if you choose the right insurance plan for yourself. Below is a list of some of those advantages:
- It gives a lump sum of the principal capital which is great to resolve any immediate family financial crisis.
- It is a great safety net for most people because life is very unpredictable and thus it is always a good idea to have term insurance in place, especially if you are the sole earner in the family.
- Many term insurance plans will also take care of any outstanding liabilities and loans of the insured to ensure that no additional financial burden falls on their heads.
- Term insurance plans can also be written off as a tax benefit while the time a premium is being paid by the insured.
To conclude, a long term insurance plan is an unavoidable financial investment that everyone wants to apply for once in their lifetime. However, it is the best idea to invest in them at a younger age because the younger and healthier the person, the lower the cost of payable amount as premium since it increases as the age of the insured increases.