Term plans: Understanding the essentials

We list the 5 salient points that you need to know about term insurance.

Buying a term plan has become par for the course for those who are sensitive to the current and future needs of their loved ones. Though all the relevant information is freely available, buying a term plan online can become a tricky business if you are not aware of some important facts.

If you are about to buy a term plan, you must be aware of 5 important features of the same:

1. Buying term insurance is very simple. Earlier generations of Indians were used to buying insurance from the insurance provider branch offices, or through brokers. But buying term plans is extremely simple today. You can buy a term plan online in minutes, after entering details in the application form provided on the insurance provider’s website. After selecting the right plan and filling all the details, you can proceed to pay for the policy using Net banking or NEFT. Most insurance companies also do not insist on medical tests to complete the purchase.
2. The tenure is a limited one. Most term policies are structured such that once the tenure is up, the plan is terminated at that point – there cannot be a renewal of the policy or an extension of the tenure at that point. A new policy must be purchased at this point. The premiums paid are not returned to the policy holder, nor is there a plan maturity benefit. It is important to know these features before you buy the term plan.
3. It provides ample coverage. The term insurance plan is extremely useful for the families of those who take these policies. This is because the term plan has a very high sum assured amount. Currently, term insurance has some of the highest sum assured amounts across the insurance spectrum. Thus, the policy corpus allows the family members to enjoy a comfortable life even in the policy holder’s absence.
4. Anyone can buy it. Another important benefit of buying a term plan is that the premium payments are extremely affordable. This makes it an attractive option for those who have recently started working, or those who face many demands on their monthly income. Even as one pays a low premium amount, one can get a high coverage. Meanwhile, one can buy a more expensive plan at a later date.
5. You can decide the mode of pay-out. Not all term plan providers pay a lump sum amount on plan termination. You can decide the mode and frequency of pay-out at the time of buying the term plan. You can opt for a lump sum payment, or you can choose a periodic payment term so that your family members receive regular income.