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In present day and age, we work hard to improve our family’s standard of living, achieve a decent financial status, fund the education of our children, secure a dignified retirement, and so on.
However, life can often be unpredictable, and an unfortunate incident might put your family on the backfoot, financially. Hence, you need to make sure that your family is financially secure, even when you are not there. One of the best instruments that help you achieve financial stability for your family is term life insurance.
Term insurance helps take care of your loved ones in case of your untimely demise and ensure that your family can manage their daily expenses and achieve their life goals.
A form of life cover, term insurance plans offers you coverage against life’s uncertainties, for a pre-determined period. In case of your demise within the term policy tenure, then your family members receive the total coverage amount.
Typically, term plans offer lower rates of a premium than other life insurances, because they do not offer any maturity benefits, i.e., there no benefit payable in case you survive through the term policy tenure. New-age, smart term plans from reputable insurers such as Max Life Insurance; however, offer several other benefits such as the return of premiums upon surviving the policy tenure and financial protection against life-threatening ailments such as cancer.
While you can avail term insurance protection for up to 50 years, the premium payable under term plans remain level for the complete policy tenure. Therefore, it is beneficial to purchase a term plan as early as possible, in your life,
1. Premium Payable: Opt for a term plan that offers the maximal insurance coverage at the lowest possible premium rates.
2. Cover Enhancement Options: Various insurers provide the insured the chance to enhance their life cover at the important stages of their life. Well, search for that.
3. Claim Settlement Ratio: Claim settlement ratio is the number of claims settled by the insurer in a given financial year. Therefore, the higher the claim settlement ratio, the higher are the chances that the insurer would pay your claim.
4. Solvency ratio: It gives a clear idea about the insurance company’s ability to make satisfactory pending claims and expand the business without going bankrupt.
5. Riders: An insurance rider is a top-up to the basic term plan that offers benefits over and over the subject of the policy.
The tenure/duration of your term plan is as crucial as the premium you pay. The purpose of term insurance is to help your loved ones meet their lifestyle and future needs, even when you are no longer there to support your family.
Therefore, the best term of the term insurance plan should end at a time when all your financial goals have been achieved, and you have no substantial financial liabilities such as loans, to care of. You must purchase a term plan as early in your life as possible, so that not only can you opt for the maximum possible policy tenure, but also avail the lowest possible rate of premium.
Being the simplest version of life insurance, term plans only offer the insurance benefit in case of an eventuality. Typically, term insurance plans provide a lump sum assured to your nominee after your demise within the policy tenure. The sum insured, which is payable to the beneficiary, is mentioned in the policy documents.
Term insurance plans also offer different payout options to policy buyers. The sum assured amount is paid based on the type of payout option you choose at the time of purchasing the policy. The payouts can be made as a lump sum payment at one go or as regular income at specific intervals of time.
• Lumpsum Payment: The entire sum assured is paid to the nominee of the policy at once, immediately after the policyholder’s demise. In case, you purchase a term plan with TROP feature (a term with return of premium), you would receive the total amount of premiums paid towards the policy, in case you survive the policy tenure.
• Lumpsum Payment + Monthly Income: In this variant, the nominee will receive up to 100% of the insurance cover as a lump sum, along with a fixed monthly income. Here, the monthly income component will be up to 0.4% of the Sum Assured, payable to the nominee for up to ten years after the policyholder’s demise.
• Income Replacement or Monthly Income: Under this option, the nominee receives a fixed level monthly income for a specific duration, i.e., up to 10 years, 15 years or 20 years (the payout period is chosen by the policy buyer at the at the time of policy purchase).Also, different insurance companies may offer payout options, such as:
 Lumpsum Payment with an increasing income component - the monthly income component increases after each policy anniversary, for a fixed number of years
 Lumpsum payment of increasing cover - the coverage amount increases at regular intervals and is paid as a lump sum to the nominee
 Lumpsum payment of reducing cover - the coverage amount decreases at regular intervals and is paid as a lump sum to the nominee
As financial instruments, term plans offer not only long term financial security but also provide significant tax savings throughout the policy tenure. Before purchasing a term plan; therefore, you must analyze your family’s needs and choose the option best suited for you and your family.
