Term life insurance plans are a type of life insurance plan which offer risk protection. You pay a premium for a sum assured for a fixed time period. If a policy holder dies within the term of the plan, the nominees get the sum assured called death benefits. No money is paid to nominees if the policyholder survives the term of the plan. Insurers have the beneficial nominee who receives the death benefits on the death of the policyholder. The insurer pays the beneficial nominee only, irrespective of claims of legal heirs.
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Term insurance plan is affordable: A term insurance plan is a pure risk plan with no survival benefits which makes it really cheap. Simplicity makes term life insurance plan affordable. The premiums of term life plans are lower than endowment plans, whole life insurance plans, ULIPs and money back plans.
Term plans are easy to buy: You can easily avail term life plans online. Compare term life insurance plans on an insurance aggregator to get an idea on premiums. Term life insurance requires you to choose sum assured depending on financial goals. Use HLV Calculator to calculate sum assured in a term life insurance plan.
Term insurance plans with return of premium: You may not like term insurance plans because there’s no survival benefit. Insurers also offer the term insurance plans with return of premium. You get all premiums paid on surviving the term of the plan. Term insurance plans with return of premium are more expensive than plain vanilla term life plans.
Staggered payout option: Term life insurance plans offer the staggered payout option where nominees get the payout in stages. If you believe the nominees can’t handle the lump sum or greedy relatives may defraud nominees, opt for the staggered payout option. Opt for staggered payout option when availing the term life insurance plan. The nominees get part of sum assured as a lump sum and the remaining amount in stages.
See Also: Health Insurance Benefits
Flexibility in term life insurance plans: Insurers allow paying term life insurance premiums monthly, semi-annually or annually. Choose premium paying term as per budget and convenience.
Term life plans are pure risk plans. They offer no survival benefit keeping premiums low. Endowment plans offer savings + insurance and ULIP Plans offer investment + insurance. They charge higher premiums for this benefit. Term plans charge low premiums and you can invest the money saved on premiums on investments based on risk tolerance. Most endowment plans even with bonuses offer returns of just 6-7% a year.
Premiums increase with age and tenure. Life insurance plans with higher sum assured or longer tenure charge higher premiums. Term plans with return of premium option are costly as premiums are returned at maturity. Riders make term life insurance plans expensive.
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