5 Benefits of a Term Plan !!
What is a Term Plan?
A plan which offers financial safety to your dependants in case the sad demise of the policy holder. This is purely a death benefits plan, meaning the company would pay only in case the policy holder dies. These plans have come into the market with an intention to capture a large market. They offer better cover, at much lowers premiums because they do not provide any “returns”.
Basically, if you have liabilities which you need to fulfil, you would be much better off if you have the protection of a term plan. Many companies have their own version of Term plans and it is very easy to apply to them, more about it later.
Today we will discuss the benefits of Term Plan:
- Easy Application:
You can apply for the term plan online with a few clicks. Almost all insurance providers have their own variations, but their basic aim is the same. A few notable ones would be Aegon Religare iTerm, ICICI iProtect, HDFC Click2Protect etc. All you have to do is go to their website and read about the plan. If need be, discuss them with your family and then if you feel that this is the correct plan for you then go ahead and click buy.
Tip: Keep ALL your original documents like Aadhar card, PAN card as a scanned copy on google drive. It’s easy to attach them when you are buying such policies online. Declare everything when you are applying for the plan. Withholding information can lead to refusal of a claim by the company.
2. Huge Cover with Less premium:
This basically depends at what age you are applying for the term plan and what si the cover you are asking for. These two factors would decide what premium you will be paying. The younger you are the lesser your premium.
Example: If “X” is 25 and he applies for a cover of 2Cr, he would be paying a yearly premium of about 20,000INR. This is assuming he is buying an Aegon Religare Policy with a few riders and is a NON-SMOKER.
If same parameters are applied to “Y” but he is 30 years of age, he would end up paying a much higher amount, somewhere above 30,000INR.
Tip: At the time of buying a policy, choose one which has a high claim settlement ratio. This means when there would be a need for he company to pay, they will. This does not necessarily mean that a low claim ratio product is bad, it may have multiple reasons for having a low score.
3. NO investment angle:
This is probably the best part. Term plans do not invest your money anywhere. So they do not have a maturity benefit. It means that if you do not die till the term of the policy ends, then the policy is void after that. The company will not pay you anything. This is one of the reason whys the insurers are able to keep the premiums so low. They do not have to invest in additional manpower to invest and track your money in the market. It’s an insurance, Not an investment.
Tip: Always keep insurance and investment SEPARATE. Never ever mix them.
4. Great news for NON-SMOKERS:
This benefit is only for those who hate the smoking. Who knew that not smoking could also be “cool” at some point in time. The difference between the policy premium of a smoker and a non-smoker for the same policy can be a lot. Plus it’s not a good habit anyways so rejoice !!
5) Have additional benefits: Riders
- Accidental Death Benefit Rider: A small extra amount is charged along with the basic policy premium to avail this rider. Here as the name suggests, if the policyholder dies due to some accident, then he is eligible to get the benefit in the form of extra sum assured. This amount is over and above the basic sum assured. However if he doesn’t die due to an accident, then he cannot claim under this rider.
- Return Od Premium: This is designed to cater to those individuals who wish to get back their money if nothing happens to them throughout the term of the policy. Obviously, in this case, the premium is considerably higher.
- Critical Illness: Some diseases are termed as critical illness in the policy if you happen to contract any one of them then an amount equivalent to the sum assured in the rider is paid out to the policyholder. It important to note that generally these riders have a waiting period, they become applicable only after that time frame. You should know what that time frame is in your own policy. Some also state that the payout will only be made if the person survives the illness for a specified tenure AFTER the diagnosis. Generally 30 days.
- Waiver Of Premium: If due to any accident the person has become permanently disabled and would not be able to pay the policy premiums, he will be exempt of the future premiums if he had taken this rider at the time of taking the policy. This way he can still ensure that he is covered and hi financial obligations are taken care of.
Tip: Normally it is best to take the Waiver of Premium and Accidental Death Benefit rider. They can play a vital role in your future security.
Also, understand if the policy would cover you only when you are on land or also when you are sailing. Some policies have a cover only in India. You need to confirm from your insurer these fine points. If you happen to meet with an accident in another country after your sign-off? Will your insurer cover you for that? Get it cleared out.
A term plan is your best bet in safeguarding your financial future, go ahead and take one !!