Guide to Understanding the Term Insurance Plan
Life is unpredictable, and we are at the risk of unpredictable death. If you are the sole breadwinner of the family, after your death, your family will lose its main source of income. In such a case, your loved one will suffer a major financial crisis.
Even if you have some savings, it will only help a little. This is where the term insurance policy offers financial security and assists your dear ones to deal with the financial losses. In this blog, we tell you everything you need to know about term insurance plans.
What Is A Term Insurance Plan?
A term insurance plan is referred to as pure life insurance that covers the death risk. You can select the sum assured as well as the term plan. Moreover, the premium for this plan is determined based on the sum assured, age, health risk, and tenure. If the insured person dies during the term of the plan, the assured sum is given to the nominees. Contrary to other forms of life insurance, there is no investment value or maturity benefits.
What Are the Features of a Term Plan?
This savings plan comes with the following features:
Types of Plans
There are five different types of term plan that include:
- Increasing Term Plans: In this form of term plan, the assured sum increases each year by a particular percentage.
- Decreasing Term Plans: In this term plan, the assured sum tends to decrease every following year by a certain percentage.
- Level Term Plans: It is also known as a term insurance plan. It pays the insured sum upon death during the term of the plan.
- Monthly Income Plans: It is a plan that offers benefits partly in lump-sum and partly in monthly installments.
- Return of Premium Plans: These plans do not have maturity benefits. If you survive the tenure period, the aggregate amount of premiums you have paid will be given back upon maturity.
The tenure of the term plan generally ranges between 10 and 40 years, considering the age of the insured. Additionally, the entry age varies between 18 years and 65 years, and the age of maturity in term insurance can be set up to 80 years. Generally, people should choose the highest term possible to enjoy their coverage for a longer period of time.
Insured Sum and Premium
Term plans provide you with high coverage at low premiums in comparison to conventional life insurance plans. This is the main USP of the term life insurance plan. By offering substantial coverage at economical rates, it enables individuals to get easy financial security.
Claim Settlement Ratio
This is the claim ratio that insurance companies highly honor. For instance, when you see a 95% claim settlement ratio, this means that the company has settled 95 claims out of 100. When looking for a term insurance plan, you should choose the company with the best claim settlement ratio.
A term insurance policy is one of the sought-after insurance coverage. Above, we have shared some useful information that will help you in understanding it more thoroughly.