5 Things You Never Knew About Term Plan Insurance

Life is full of uncertainties. You never know what is to come next. You can only be prepared for them. A term plan insurance will help protect your family if the unimaginable happens. Buying a term plan insurance will help you live peacefully while securing your family's future.

Let us look at term plan insurance and five things you never knew about it in detail.

What is Term Plan Insurance?

In simple words, term plan Insurance is a legal agreement between the insurance provider and the policyholder to offer life cover to the beneficiaries in the event of their demise. The death benefit offers an assured sum to the nominee filed by the beneficiary while buying a term plan insurance. Premiums paid for a term plan insurance are paid annually. The assured sum is thus paid from this plan corpus.

Term plan insurance is a form of life insurance that provides the ultimate life cover for unfortunate events. As you learn more about term plan insurance, you will realise that it plays a significant role in financial planning, especially in the long run.

5      Things You Never Knew About Term Plan Insurance

1.    Term Plan Insurance Coverage: Before buying a term plan insurance, you must know the amount of coverage you would require for the security of your family in case of your unfortunate demise. You can use a term life insurance calculator to find the best coverage. You can perform this simple calculation by following a few steps mentioned below.

Step 1: Figure out the expenses of your family every month. Then multiply the figure by 150; the multiplier of 150 will take future inflation into account.

Step 2: Now you must keep in mind your liabilities, such as credit card bill payments, home loan debts etc.

Step 3: You must subtract your existing flexible assets, such as fixed deposits, mutual funds or even stocks.

Step 4: Now imagine the next 15 years; how would it look for your family? Count the expenses for future events such as a wedding or higher education plans for your children and add that.

Step 5: Add the retirement fund you would like your spouse to have on their retirement.

2.    Term Plan Insurance Tenure: It is crucial to determine the tenure of your term insurance plan. The duration you need it for is important because the tenure should not be too short; otherwise, the insurance will lapse early. On the other hand, if you opt for a longer tenure, you would have to pay higher premiums.

To determine the best tenure for you, you will have to calculate the year by which your stocks, FDs, provident funds, mutual funds, etc., combined will increase in amount compared to the maturity value of your term plan insurance. It is said that the year these two figures coincide should be the year till which you would need life coverage.

Source: Shutterstock

Coverage Per Rupee of Premium: After investing in a term plan insurance, you must rest assured. What is the need to buy one? You buy insurance to live a stress-free life; therefore, when buying a term plan insurance, you should look for an insurance provider with a market reputation or companies that are more reliable.

Term plan insurance is a hard commitment since it remains valid for long. Hence, it would help if you chose term plan insurance with affordable premiums and a reliable insurance provider.

Term Plan Insurance Riders/Add-ons: A term plan insurance is a good deal in itself; however, there are certain add-ons, also known as riders, available on your plan. This will help you in building a stronger life cover plan.

●     Waiver of Premium: The life insurance coverage will continue without fail in the case of permanent impairment or critical illness, necessitating no additional premium payments.

●     Accidental Death: The finest term plan insurance also includes an accidental death benefit, which pays the nominee the agreed-upon sum in case the policyholder dies, unfortunately, while the insurance policy is still in order.

●     Critical Illness: The policyholder will receive financial assistance if diagnosed with any critical illness mentioned in the contract.

Claim Settlement Ratio: The percentage of claims paid relative to the percentage of claims filed is known as the claim settlement ratio. When selecting an insurer, you must consider the claim payment ratio. For example, purchasing life insurance would be pointless if the insurer denied the policyholder's claim under the terms of the policy.

You can calculate the rate of premiums for your term plan insurance using a term life insurance calculator. A term life insurance calculator will assist you in comparing the different plans available in the market from different insurance providers. It will help you in getting the best-suited term plan insurance for yourself. A term life insurance calculator is a wonderful way to choose the best plan and calculate premiums for your desired life cover amount.