Meet Rishabh and Neela, two best pals who had always stuck to each other through tough and good times. One afternoon, as they sipped their favourite beverage at a stall, the conversation took a new turn and the topic was term plan, something that had been on their minds lately.
Why is a term plan important?
Neela said, “Do you understand how essential it is to buy a life insurance policy or term plan? It is the same as a safety net for our beloved ones, which ensures financial protection in the scenario of financial uncertainties.”
Rishabh agreed, “Yes, Neela. A term policy provides mental peace and serves as a financial cushion for our family members when we are not with them anymore. However, you know what? There is more to this.”
Top benefits of availing a term plan
Affordable premiums
Term plans are cost-effective, making them accessible for individuals from various financial backgrounds.
Financial security
A term plan provides a lump sum amount to the nominee in case of the policyholder’s demise, ensuring their financial well-being.
Loan protection
If you have loans, a term plan can cover them, preventing your family from being burdened by debts.
Tax benefits
Premiums paid towards a term plan are eligible for tax deductions under Section 80C of the Income Tax Act.
Flexibility
You can choose the policy term and coverage amount that suits your needs, ensuring a tailored solution.
Terminal illness benefit
Certain policies offer a payout if the policyholder is diagnosed with a terminal illness, helping with medical expenses.
Critical illness rider
Some term plans offer riders that cover critical illnesses, providing an added layer of protection.
Premium return
Some term plans offer a return of premium at the end of the policy term if the policyholder survives.
Financial independence
A term plan empowers your family to make choices without financial constraints, such as education and marriage expenses.
Family’s future
It guarantees that your loved ones can maintain their lifestyle, fulfil their dreams, and have a secure future even in your absence.
Factors to consider when availing a term plan
Policy term
Decide the duration of the policy based on your long-term financial goals. Consider when you anticipate your responsibilities reducing, such as children becoming financially independent, or mortgages being paid off. A longer policy term ensures coverage during your most financially vulnerable years.
Coverage amount
Calculate your financial responsibilities, including outstanding loans, living expenses, education costs, and any other financial obligations. Ensure that the coverage amount you choose adequately supports your family’s needs. It’s crucial to strike a balance between providing financial security and affordability.
Premium affordability
Carefully assess your budget and income to ensure that the premium amount fits comfortably within your financial plan. Overextending your budget to pay premiums can lead to financial strain and potentially result in policy lapses, which can be detrimental.
Claim settlement ratio
Research the insurer’s claim settlement history. A high claim settlement ratio indicates that the insurer efficiently processes and honours claims. This ensures a hassle-free claims process for your family during a difficult time.
Riders
Evaluate whether you need any additional riders like critical illness or accidental death benefits to enhance your coverage. Riders offer additional protection and can be customised to suit your specific needs, but they also come at an extra cost, so choose wisely.
Policy exclusions
Understand the policy exclusions to know what circumstances may not be covered. Exclusions can include pre-existing medical conditions, suicide within the first policy year, or deaths due to participation in hazardous activities. Knowing these exclusions helps you manage expectations.
Nominee selection
Designate a trustworthy and responsible nominee who can handle the claim process efficiently. Ensure that your nominee is aware of their role and the details of the policy, so they can smoothly navigate the claims procedure if necessary.
Medical check-up
Be prepared for a medical examination, as it can affect your premium and eligibility. The insurer may require a medical check-up to assess your health condition, which can impact the premium amount you pay. Be honest during this process to avoid future claim rejections.
Premium payment mode
Choose a premium payment mode that suits your financial planning, whether it’s annually, semi-annually, or monthly. Opt for the mode that aligns with your cash flow to ensure timely premium payments.
Waiting period
Familiarise yourself with the waiting period for certain critical illnesses to be covered. Many term plans have a waiting period before they cover critical illnesses. Be aware of this waiting period and consider additional riders for comprehensive coverage.
Policy renewal
Know the renewal process and the premiums involved for the long-term sustainability of the policy. Some term plans may offer the option to convert into a whole-life policy upon maturity, while others may require you to purchase a new policy after the term ends.
Solvency of the insurer
Ensure that the insurer is financially stable and capable of honouring claims. Check the financial ratings and reputation of the insurance company to have confidence in their ability to meet their obligations.
Policy documentation
Keep all policy-related documents in a secure place and inform your family about their location. This ensures that your family can access important information in case of an emergency.
Comparative analysis
Compare term plans from different insurers to find the one that offers the best value for your money. Look at factors like coverage, premiums, riders, and customer service to make an informed decision.
Assess periodically
Timely assess your insurance to make sure it is in alignment with your needs and financial goals. Circumstances in life change and your policy must adapt to such changes to continue endowing sufficient coverage.
As Neela and Rishabh continued their discussion, they realised that availing a term plan was not just about securing their future but also about providing their loved ones with the means to thrive in their absence. It was about being financially responsible and ensuring that the journey of life continued smoothly, even in uncertain times.
So, Neela and Rishabh made a pact to explore term plans together, ensuring that their financial futures were safeguarded. They knew that by considering these factors, they were taking a significant step towards securing their family’s well-being and facing life’s uncertainties with confidence.
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