Most people in India are familiar with life insurances and many are even insured under various policies. Term insurance plan is very popular among the Indian population due to the benefits it provides. The simplicity and the low risk factor makes this a go to option for the Indian population looking to get covered. The term insurance plans are cheaper than other insurance policies and provide the same coverage as the others. This also makes the term insurance plans more preferred by the general Indian population.
What is a term insurance?
Term Insurance plans are pure risk insurance policies. The term insurance plan covers for the misfortunate death of the person insured. Like all insurance policies, the person looking to get insured will pay the premium for the policy. The premium paid is according to the duration the plan goes on for. The beneficiaries receive the profits and benefits if the person insured dies while the policy term is still active. There is no maturity or survival benefit if the person who is ensured outlasts the policy term. The term insurance plan is simple, you pick a term period you want to be covered for and then you pay the premium for policy term.
Term plans have various offers for coverage ranging from 5 years to 30 years depending on the insurance company. Insurance companies such as MetLife Insurance offer coverage up to 99 years along with pay out options that are flexible and other tax benefits. Term insurance plans are popular as they have a low-cost value than the various insurance policies while providing the same protection. Term insurance plans offer a much higher return than the premium invested.
What are the advantages of term insurance plans?
Term insurance plans are easy to understand than other plans like the endowment policies. Endowment policies combine savings with risk cover. Plans that comprise saving components with risk covers are called cash value plans. To part the premium a person pays into the amount being invested on their behalf as savings and risk cover cost is not easy for anyone. Planning financials goals around policies such as the cash value plans is a lot more complicated than the term insure plans which are straight forward. Term life insurances are simple as the person pays the premium and gets the coverage he or she wants for a set term. Meanwhile, cash value plans also have rules regarding things like size of an insured person’s cash savings, repayment of policy loans etc. which make understanding the policy even harder. This simplicity acts as an advantage in the favour of term insurance plans.
Term insurance plans are flexible as it is really easy to opt out of these policies. Opting out of term insurance plans is easy as all the insured person has to do is to not pay the premium. Once the insured person does not pay the premium the policy will end. Nothing is paid to the insured though as there is no element of saving in this policy. In cash value policies there is a saving element involved and the person is offered a full survival benefit if they hold it for a full tenure. Therefore, making it harder for the insured to opt out. Besides the freedom to opt out whenever the insured wants, they can also renew the plan after it is over and even convert the term plan into an endowment policy if they want. An insured person can also increase the term of the policy further if they want to.
Availability of plans for every budget
If an individual’s budget is a tight one and they need coverage the term insurance plans are more preferable than the cash value plans. Cash value plans cost more than the term insurance plans. This policy is suitable for those who have low income or are the sole bread winners in the family as they do not require a large premium to provide coverage. On the basis of price, term policies are easily comparable with each other. Due to all of them having a similar structure and being easy to understand the market of term policies is booming. This provides the buyer with competitive prices and few problems related to information.
The premium for term insurance plans are a lot lower than that for the cash value policies of the same comparison. The annual premium is about Rs 50,000 for an endowment policy with profits. With the death benefits being exactly the same as the term insurance plan, the annual premium will be slightly above Rs 30,000 for an endowment policy without profits.
Meanwhile, a 30-year old person can purchase a level term insurance policy for a set term of 20 years with an assured sum of Rs 10 Lakhs to beneficiary for an annual premium of just Rs 3000.
Full coverage for family
Term insurance plans ensure future insurability. Term insurance plan is the minimum requirement to secure your family members financially in case of an untimely death. The most cost-efficient way to protect an individual’s income in the future from the risk of them dying before they have rightfully earned it is a term insurance plan. Inexpensive term insurance policies can be converted into cash value policies in the future without the requirement of any medical check ups and examinations. If some individual plans to get a cash value policy at a late they might get denied due to a medical check up or other tests regarding their health. Term insurance plans are also used by many employers to cover for their employees at low costs as a measure for the welfare of the staff usually the ones belonging to the labour class.