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Sunday, 7 June 2015

Term Insurance Plans: An Insight

Term Insurance Plans are Pure Insurance Policies which provide insurance coverage against periodic payment of premiums for a fixed tenure of time. Term Insurance policies are available at very affordable rates. Since it is a pure insurance policy you don’t have any maturity value on completion of the tenure.
Term Insurance Policy is a must for Individuals irrespective of whether they are employed or into business. It provides financial security to your family in case of any tragic event takes place in your life. As the Premium on these types of policies are very low individuals can go for higher coverage thereby providing their loved ones with better financial security.
Term Policies are offered by Public Sector Undertakings (PSU’s) as well as Private Insurance Companies. The Insurance companies do offer additional benefits along with the insurance which may vary from policy to policy and on Insurance companies as well.

Read About:Term Endowment Plans

Read More About Money Back Insurance Plans

ENDOWMENT AND TERM INSURANCE POLICIES: DIFFERENCE

Endowment Insurance policies are the Classical Insurance policies which combine Savings with Insurance. These policies are much more expensive as compared to Term Insurance policies. Endowment Policies have a maturity value, on successful completion of the tenure and lumpsum is paid to the Subscriber, unlike the Term Insurance Policies. This type of policy is preferred by the conservative investors as it provides insurance cover along with assured return (with interest) on successful completion of the term. However the interest earned on this type of policies is pretty low.
Term Insurance on the other hand, does not have any maturity value and just provides Insurance cover to the subscriber. Thus the Term Insurance is much cheaper and affordable. Term Insurance lets you enjoy higher insurance cover at a lesser premium unlike the Endowment Policies which are pretty expensive and you need to pay high premium for lower insurance cover.

FEATURES AND BENEFITS OF TERM POLICIES
  • Death Benefit equal to the Sum Assured chosen by an Individual.
  • Term Insurance policies may be purchased online.
  • These policies have lower rate of premium as compared to other Life Insurance Policies.
  • Term Insurance Policies may provide Additional Benefits like Accident Death Cover (up and above the Sum Assured).
  • In addition to the Sum Assured, Some Policies also provide customized payout options like Regular Income (Monthly Payments) to the nominee/s.
  • Medical tests are conducted in some cases before issuing a policy.
TAX BENEFITS

Tax Benefit is available U/S 80C (upto Rs 1,50,000/-) for Investments in Term Insurance Policies. Death Benefits are also exempted U/S 10 (10D) of the Income Tax Act.

MATURITY/SURRENDER VALUE

Term Insurance has no surrender or Maturity Value.

FREE LOOK IN PERIOD

Most of the Term Insurance comes with at least 15 days of Look In period. During which you can have a detail look into the policy and decide whether you are going to continue with or reject it.

GRACE PERIOD

A Grace period of 30 days after the due date is allowed for the Annual Payment of Policy Premium. Failing which the policy will lapse.

POLICY TERMS AND CONDITIONS

Each Insurance company tries to offer some additional benefit in order to attract subscribers for the same.
Thus policy terms and conditions vary from company to company.

TENURE OF TERM INSURANCE

Term Insurance is available for tenures ranging from 5 years to 40 years.

INSURANCE COVER AND PREMIUM (*INDICATIVE)

As stated earlier, the Premium for Term Insurance Policies is pretty low. For Life Cover of Rs 1 Crore, the premium could be as low as low Rs 9,000/- p.a.

(Please Note the Premium on Life Cover vary from Insurance Company to Company and Policy to Policy, above mentioned figures are just an illustration.)

HOW TO CHOSE A TERM COVER?

Individuals are often confused about the Term Cover they should chose for themselves. In my opinion Term Cover should be atleast 20-25 times of your annual income.

PURCHASING A TERM INSURANCE

Term Insurance may be purchased online as it reduces the administration costs for the respective companies and provides you greater Life Cover at much cheaper rate.

REGULATORY AUTHORITY

Insurance Regulatory and Development Authority of India (IRDAI) is a statutory body which regulates the Insurance Industry.

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