We are all part of a very fast paced world where we constantly look to upgrade ourselves, strive for a better future or do something more. Amidst all of this, we at times forget some of the basics. Though these basics might not have an immediate impact but in the longer run they always hold your back. A term insurance is one such basic entity that a lot of us just tend to ignore or feel that it is just not for me.
A term insurance is the most vanilla form of insurance that your money can buy for you. Unlike several other insurance products, it does not have different components. The entire insurance premium that you pay is spent on providing you with life cover. This subtle change makes a term plan an effective solution for securing your future.
It is one of the most affordable plans yet provides the highest life coverage. A term insurance is a great way to ensure financial freedom for the future should something wrong happen to you. It makes sure that your loved ones can focus on ways to improve their life rather than worrying about their finances. A well planned term insurance would also take care of your future needs such as children’s education etc.
What Kind of Term Insurance Do I Need
Term insurance plans are usually classified into the following categories. You can check with your insurer if they provide these plans.
- Increasing Term Plan
As the name suggests, in this type of policy the sum assured increases on a yearly basis. However, there won’t be any increase in the insurance premium. This type of plan is ideal for individuals who are about to start their family life. As the responsibilities increase, a higher sum assured is a must.
- Decreasing Term Plan
This is the opposite of the increasing term plan. The sum assured in this case reduces year on year. A decreasing term plan is ideal for someone who has large EMIs against his/her name. As the loan amount goes down on a yearly basis, the policy’s sum assured also reduces accordingly.
- TROP (The Return of Premium Term Insurance)
TROP is the acronym of Term with Return of Premium. Should you choose this type of policy; the insurer will refund you the entire amount that you have paid as premiums during the entire tenure of the plan. This only condition being that you see the entire term through.
- Convertible Plans
Some insurers have adopted a new approach wherein they let the policy holders change the policy type. If you have started with a term plan and wish to convert the same into a whole life insurance plan or an endowment plan, you can do so.
Based on your requirements and needs, you can pick any one of the above.
Things to Consider While You Choose Term Insurance
Buying a term insurance plan is probably one of the smartest financial decisions that you can take. However, here are a few points that you must keep in mind before signing the application forms.
- Early Birds
Starting a term plan earlier has quite a few benefits. Since you are young, you will benefit from lower insurance premiums. With increase in age the chances of illness or diseases also increase, making it a little bit more difficult to secure a policy.
- The Right Sum Assured
Under-insuring is a problem that you must keep yourself away from. Before you buy a term plan, take some moments and figure out the exact sum assured that will suffice your needs. Consider various responsibilities such as home loan, children’s studies, car loans etc.
- The Right Insurer
Since you will be associated with the insurer for a long period of time, it is essential that you choose the right one. Consider a couple of factors such as the solvency ratio and the claims settlement ratio of the insurer. An insurer with a strong customer service department can also be another point to consider.
- The Right Rider
Insurance agents keep selling riders, even if it doesn’t make sense for your case. Choose riders only and only if you really need them. Buying them just because they are available might not be the best decision.