Factors to Consider While Buying a Term Plan

The feel of being financially independent makes you feel like it is Christmas. Dealing with consistent needs of the family and fulfilling them when you have a heap of responsibilities and obligations on your shoulder. Moreover, striving hard to give yourself and your family a lifestyle.

Regardless of whether you are unmarried starting at now, there will come when you will be hitched, start a family. As time passes, the obligations do not, decrease up rather it continues expanding and there is no closure to necessities and prerequisites of people. To meet those desires you continue searching for opportunities and bringing financial stability.

You are aware of your past, living and embracing the present and now yet you are uncertain of what is happening next. Today, you are there to take care of the financial needs of your family however consider the possibility that one day you are not around for the equivalent. The grievances of loss of a person are heart-wrenching not just emotionally but financially as well. Secure your family’s financial needs with buying a term insurance plan, which will be there to take care of your ones after you have left.

What is a Term Insurance?

A term plan is essentially a type of insurance policy, which provides coverage either for a specific term or for a specific period. If under any unfortunate accident the insured dies during the policy term then the insurer is liable to pay the sum assured to the nominee as mentioned in the policy schedule.

The term plan is designed to cater to the needs of the family under the demised of the insured.  Depending on the prerequisites of the family, the insured can opt for the coverage accordingly.

Important Factors to be Considered While Buying a Term Plan

It is of prime importance to understand that needs and requirements may differ from person to person. The requirement of a 40-year-old man with a wife and a child will be different compared to a 30-year-old man with a wife to be taken care of.

Here we have enlisted some important factors, which ought to be considered while buying a term plan:

  • While buying a term plan it is essential to understand the term of coverage, you are looking for. Know the number of years your family ideally would be dependent on you. Moreover, if there is an existing loan or liability makes it is sure that it is not transferred to your ones after your demise.
  • It is recommended that always look for an insurer who has a good reputation with the highest claim settlement ratio to ensure a higher payout probability.
  • When deciding a term cover it is important to take into consideration the rate of inflation. For instance, if the rate of inflation is high today that does not guarantee it would cover the family in prospects.
  • Opt for a cover amount, which is 8-10 times of your gross income. Remember, sufficient coverage has to be on your priority.

Advantages of Buying a Term Insurance Plan

Let us have look at some of the major advantages of buying a term plan:

  • In terms of premium, the term insurance premium is lower than comparative cash value policies. The premiums are lower when you buy a term plan at a younger age. Younger the age the lower will be the premium to be paid.
  • The essence of the term plan lies in its simplicity. All you need to do is simply pay the premium amount against the coverage you have opted for a fixed duration.
  • As the term plan is simple to understand therefore the policies can easily be compared based on the prices it has to offer.
  • Whenever you feel like discontinuing the term plan, you need to worry about the hassle at all. All you have to do is stop paying the premium against the coverage and your policy stops there itself.
  • Under two sections of the Income Tax Act, a term plan is advantageous:
  • Section 80 C: You may effectively profit term insurance benefit on the taxability of income on the premium paid towards the policy. If your premium towards term insurance goes up to the furthest reach of Rs. 1.5 lakhs, at that point under such a circumstance you are exempted from tax under U/S 80C of IT Act 1961.
  • Section 10 (10D): You may likewise be excluded from tax under section 10 (10D) of Income Tax Act 1961 with the maturity benefit being given by some term insurance policy.

Limitations to Buying a Term Plan

Let us have look at some of the major advantages of buying a term plan:

  • If you intend to buy a term plan at an older age that at the age of 65 or beyond then the insurance companies may not offer you the term plan.
  • Buying a term plan for one specific need, for instance, retirement needs, education of the child, etc. will be not of much help.
  • While you are living, your family will not receive any help for needs in terms of capital.
  • Under a term plan, there is no provision of loan or surrender value.
  • In case of your demise, the renewal of your term policy is not possible.

Also Read: Best Life Insurance Plans in India 2020

Eligibility Criteria for Buying a Term Plan

The eligibility standard for the term insurance plan may differ according to the insurers.

However, the minimum age limit is 18 years and the maximum age limit is 65 years.

Conclusion

A term plan is intended to offer cover if there should arise an occurrence of death of the life insured.

To put it plainly, your life is significant. Be prudent while picking a term insurance plan since it includes cash, as well as will in general, be the crutch for your family in your absence. Continuously make sure to settle on informed decisions and do not clasp under pressure.

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About Geet Sharma

My Name is Geet Sharma Financial Blogger & Founder of Paisabank.org. We are a personal finance blog dedicated to finance & financial planners. The main aim of this blog is to help people to informed about financial decisions.
View all posts by Geet Sharma →

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