People who are entirely unaware of the basics of life insurance can struggle to understand the various types of insurance and what they have to offer. If they look for a simple, affordable life plan option, they may come across term insurance plans. These plans are known to be simple in design and can be a suitable option for young people who don’t want to spend a lot on term insurance premiums, as well as older customers who seek a temporary life cover at relatively affordable rates.
Even though term plans are known to be relatively simpler in design and are accessible to most consumers, it is important that you understand the meaning of a term insurance policy before you decide to buy one.
Here is a look at all you need to know about term insurance plans before you buy one.
What is Term Life Insurance?
Before we dive into the meaning of term insurance, let’s understand what life insurance is, and why you should get it. Change is said to be the only constant in life. When the nature of life is to keep evolving, you need to be prepared for all the surprises it may throw your way. A part of this preparation ought to be the security of your family and loved ones.
While there is little you can do without knowing what the future has in store, you could ensure their financial wellbeing. This should be done especially by the providers of the family. In your absence, your family should not have to worry about their expenses and fulfilling their dreams. On the other hand, ensuring that your family has a financial safety net even if you were not around to provide for them, could offer you some peace of mind.
Life insurance is one of the ways to create this financial security.
How does Term Insurance Function?
There are several life insurance types to choose from. Let’s assume that you choose term insurance plans for the unique benefits they offer. There are various sub-types of term insurance. You can start by browsing for the policies that suit you best.
Following this, you can use an online term insurance calculator to get estimates of how much premium will you have to pay for your desired sum assured, based on your age, gender, and other such details. Sum assured gives you an idea of what death benefit your nominee could expect if they were to claim the policy. Premium is the amount you pay to the insurance provider to buy and maintain the policy.
Features of Term Plans
Here are some of the key features of term insurance plans that can help you understand these plans better.
- Lower premiums
When you compare term life plans to other types of life insurance, you may find them to be one of the most affordable types of policies. You can use a term insurance calculator to get a better idea of how affordable these plans may be for you. Hence, if you are looking for a life cover that is low-cost, term plans may be the option for you.
- Limited duration
The cover duration of these plans can be as low as ten years. However, these are not the plans for you if you are looking for lifelong coverage. Most term life policies offer a cover up to 65-75 years of age. You may check with your insurance provider about their minimum and maximum term duration.
- Online and offline availability
If you seek to buy a term plan, you can choose to buy it online as well as offline. Today, several insurance providers offer plan details as well as purchase options on their websites. Moreover, there are several third-party aggregators who can offer you plans to buy. If these options are not for you, you can always consult an insurance agent and take their help to buy term insurance plans.
- No maturity benefits
Another aspect to keep in mind about term insurance plans is that these policies, unlike several other life insurance types, do not offer any returns if the life assured were to survive the duration of the policy. This is one of the factors why the cost of these plans tends to be lower.
- Tax benefits
The premiums you pay for your term plan as well the benefits you may receive are eligible for tax exemptions. You may consult your tax advisor to get a better idea of how you can save taxes when buying term plans.
Buying a term life plan is the right choice for several people. However, what you need to decide is whether it is the right option for you. To do so, list your goals and see how a term plan can help you achieve them.
