Term insurance is an important inclusion in your financial portfolio as it secures your family against unpleasant scenarios. Aside from offering a life cover, numerous term insurance benefits make it a wise investment decision. A smart term plan helps you build a corpus for the future so that your retirement is looked after. Experts recommended investing in a term plan early for steady wealth creation. As the future is lined with uncertainties and surprises, when it comes to investments, it is better to be safe than sorry. Before you buy an online term policy, it is important to understand the product and the features of term insurance.
Defining Term Insurance
Complexity results in ignorance. However, when it comes to building a financial portfolio, a simplified route is better preferred. One of the simplest investments to understand, a life cover term plan is a pure insurance cover that secures the policyholder’s finances for a specified term. This predetermined term can range between 10, 20, to 30 years based on the policyholder’s preference.
If the insured passes away due to an unfortunate eventuality while the term is active, the surviving beneficiaries receive a death benefit. For this service, policyholders are expected to pay a premium amount. Term insurance does not come with a maturity benefit. Meaning, if the policyholder survives the term, there is no benefit no amount is returned or paid.
Ideally, the right term plan cover amount is at least 10 to 15 times your annual income. Remember that a smart term plan will not only offer a life cover but will also work towards steady wealth creation. To transform a regular cover to the best term insurance, carefully analyse your financial requirements.
Salient Features of Term Insurance
There are several interesting features of term insurance beyond just providing a life cover. Purchasing an online term policy is recommended as it enables comparison of different term plans to find the most suitable one. Enlisted are some of the term insurance benefits that may not be commonly known:
· Sizable cover for a reasonable price: One of the greatest term insurance benefits is that it is a cost-effective plan. Even the best term insurance comes with a highly affordable premium and a substantial cover. To illustrate with an example, an average 30-year-old can purchase a cover worth ₹1 crore for a premium of merely ₹800 per month. You can determine your premium amount using a premium calculator that is available for free online. To further lower this cost, insurance-seekers must kick the habit of smoking and buy an online term plan.
· Premium payment flexibility: When it comes to the premium payment for a life cover term plan, policyholders can choose to either pay only until their retirement or until the end of the policy term. Meaning, a 30-year-old can choose to pay the premium only until retirement, i.e., until the age of 65 for a 50-year term cover.
This way, they can enjoy their retirement without having to worry about premium payments. This is a smart term plan as it continues to provide you protection when your monthly income stops. To avail yourself of this feature, policyholders are expected to pay an extra premium amount to cover for years that they will not be paying for.
· Choice of receiving the pay-out: Aside from the flexibility to choose the premium payment method, the policyholder can also choose how to receive the sum assured. This is an important feature as it will determine the financial security of your family when you are not around. Policyholders can choose to pay their beneficiaries a monthly income to take care of their daily expenses instead of giving the entire amount at once. The two common options include:-
1. Fixed Monthly Income Plan: Here, the family is paid a predetermined sum monthly for a specified tenure. For instance, if the assured death benefit is ₹1 crore, then the family would receive ₹40,000 monthly for 10 years.
2. Increasing Monthly Income Plan: In this plan, the monthly income increases by 10% annually by factoring in inflation. Meaning, for term insurance worth ₹1 crore, if the family receives ₹40,000 monthly in the first year, they would receive ₹44,000 monthly for the following year with a 10% increase annually.
· Customising the policy with riders: Riders are add-ons that strengthen a basic term plan at an additional premium. With lifestyle diseases on the rise, a critical illness rider is highly recommended. It makes benefits payable to the insured member upon diagnosis of critical illness to take care of medical expenses before demise.
Another common rider is the accidental death benefit that pays the nominees an additional sum over and above the basic cover. It is highly recommended to those who have to travel frequently for business.
· Choosing a term plan basis your requirements: Financial responsibilities do not remain the same throughout life. At every stage, individuals have to think of caring for aged parents, their spouse, children, or any other dependants. Moreover, milestones such as buying a house or liabilities such as a business loan cannot be neglected. Not factoring these in your life cover can leave your family in debt.
To prevent this from happening, it is important to upgrade your term plan ideally every five years. This will ensure that aside from an income supplement, your other liabilities and goals are also addressed in your absence.
The Edelweiss Tokio term insurance is a comprehensive term plan that stands by your family in times of trial. Aside from offering a life cover, it enables customisation to help you address changing life concerns and comes with a choice of four riders to enhance your policy.
Term insurance has become a necessity in the world of today, where our lifestyles invite diseases, and medical expenses appear to be soaring. In the backdrop of this, earners have to think of their family that relies on them for finances. Considering the combined impact of these two factors, it is imperative to have a reliable financial backup, so our loved ones are not on unsteady grounds in our absence.