7 Things You Must Know Before Buying Term Life Insurance Plans

Dec 01, 2018 | 2 weeks ago | Read Time: 3 minutes | By iKnowledge Team

Planning to buy a term insurance plan? Here are 7 basic things you need to know.

Insurance has garnered a significant amount of attention in recent times. Especially among the younger generation, who has understood its importance and are looking forward to purchase. As a financial instrument, insurance can play a vital role in the life of a person and his family. However, it is important that you choose the right one.

There are many insurance products in the market, life insurance and medical insurance being among the most preferred options. If you are the only earning person in the family, you need a product which offers better protection and cover in comparison to other insurance policies. Perhaps, you can consider term plan.

What is term insurance?

Term insurance is among the new concepts introduced in the insurance industry. Its flexible terms and customizable policies are the key factors which are known to attract insurance buyers. A term insurance works just like any other insurance policy but it covers the policyholder only for a specific period. It pays the sum assured to the policyholder, in the event of his or her death and offers no maturity benefit after the completion of the term. A term insurance has many features that distinguish it from other policies.

  1. Low premiums: When people hear about an insurance policy that offers a wide spectrum of coverage to the policy holder, they picture a high amount in their minds. Term insurance, on the quite contrary, is believed to have the lowest premium among all other policies in the market. Since the premium for term insurance policies are determined on factors like policyholder’s age, habits and medical history, for some applicants the premium can be as low as INR 500 per month. For people who look forward to investing a very small amount of their monthly income for insurance, term insurance can be an ideal option.
  2. Flexibility in Paying Premiums: There’s a myth wherein people believe that term insurances are only available for a maximum of 25 years. However, it isn’t true, as term insurance plans with extended duration, are available as well. Experts suggest such plans, as they cover for a long term, and the premium is locked, thereby preventing it from getting affected by the market conditions.
  3. Plan Choice: Term insurance policies come with a lot of options. From picking a term insurance policy with single life cover for a sole earner, to covering your spouse in a joint life policy, the options are endless. Based upon your needs and plans, you can choose the ideal product for yourself and your loved ones. Consider all the factors before buying a term insurance policy.
  4. Premium Flexibility: There are many factors involved when it comes to premium options. Earning, tenancy, disbursals, and mortality are few of the many factors which must be considered when deciding to increase or decrease the premium amount. However, the premium amount level is pre-specified and thus a policyholder cannot exceed the amount.
  5. Tax Benefit: Tax savings entice consumers towards term insurance. Tax savings featured under section 80C of the Income Tax Act, 1961, allow the policyholder to exempt from tax on premiums paid and the sum assured.
  6. Death Benefit: When the insured passes away, the sum assured is allocated to the nominated person. Based upon the type of the term insurance, the specified amount may increase or decrease, and can be availed in different ways. For instance, if the nominee is your retired father, it’s advisable for him to choose a monthly payout as compared to a lump sum payment at once.
  7. Survival Benefit: If you survive the period, you won’t get any maturity benefits. If you want maturity or survival benefits, opt for Term Return of Premium (TROP) plans instead.

Apart from these key features, there are various riders which can be added to your basic term insurance plan, thereby making it stronger. Additional coverage for a much lower amount is a key reason why people opt for it. For instance, Aegon Life’s iTerm Plus Insurance provides benefits such as premium waivers, added insurance coverage, protection against critical illnesses, to name a few. If you have a traditional plan, you can switch to the iTerm Plus plan or can add riders to avail such benefits.

II/Oct 2018/4467


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