Term Insurance is a type of Life Insurance plan that provides financial coverage to the policyholder family for a fixed time or years called the term of a policy. This type of Life Insurance offers a death benefit to the nomineee in case of death of the insured during the policy term. A term insurance plan provides high life cover at low premium plan.
Eg- A 30 years old healthy , non smoker male can buy a term policy cover Rs1 crore for his family for the next 20 years. if he buys a term plan he must pay only Rs 725/month. with this 1 crore cover, he can ensure that family will be able to maintain their current lifestyle without any hassels in case of his untimely death.
Why Should You Buy Term Insurance?
- Financial Protection To Family
- High Life Coverage at Low Premium
- Whole Life Coverage
- Additional Riders
- Multiple death Payout option
- Multiple option
- Return of Premium Option
- Tax Saving Benefit
What are the Key feature of Term Plan?
- Life Cover – Amount that family receive on the demise of the policyholder( Should be 10 times your annual income).
- Cover Till age – The age till which the term plan protect your family(generally opted till 70).
- Payment Frequency – Premium can be paid monthly or annualy . annual premium have a 10% discount.
How do I decide the amount of Life Cover( sum assured)?
Life cover or sum assured is to take care of your family expense in your absence. expense includes household expense which will increase with time due to inflation and any existing loans.
The Thumb rule is to take a cover of 10 times your annual income. why? let me expalin with an example-
Annual income= 10L
Monthly Expense = 35000/month i.e 4.2L/year
Loan=20L
As per trend your expense double in 10 years due to inflation. net expense for the next 20 years would be 1.3 crore. adding 20L to pay off yoour loan your family would need approx 1.5 cr as per your Life cover.
What should be the Duration of your Term Insurance(Policy Duration)?
Term insurance plans should cover you until your financial responsibilities are over.
- Do you want cover till you retire? ( since your financial obligation will be over). we recommend 65 in the case.
- Do you want to leave a legacy amount for your family? we recommend 75 in the case as life expectancy is 70 in India.
How do you wish to pay? (pay for limited years,pay till policy term)
You can choose the number of years you wish to pay premium till the age 60 or the entire policy term i.e regular pay , or in 5/10/15 years, i.e limited pay. Choosing Limited pay has added benefit. you can save up to 54% on your overall premium if you select limited pay for the term plan.*58%of the customers select a payment term of 10 years.
What are different riders available? why should you choose them?
Commonly used riders and reasons to add them.
Waiver of Premium on critical illness/disability– In case of permanent disability due to an accident or any critical illness, no future premium have to be paid. and the life cover stay intact. this is available as a free add on in most of the plans and is otherwise available at a minimum amount. highly recommend to add this to you term insurance plan.
Accidental Death Benefit- In case the death happens due to accident an additional payout (amount to be valued of the base sum assured) will be given over and above the base sum assured at a very nominal price. this is highly recommend to a person who travel a lot or ride a two wheeler frequently.
Critical illness rider – On dignosis of critical illness you will get a lumpsum amount immediately.
