Insurance companies are coming up with new plans and an array of features are being added to them. Understanding all of these while choosing a plan can be difficult not only for people who are new to this market but also for the financial experts. Investing in good insurance plans is on everyone’s to-do list. The current situation of the pandemic has made it even more important to plan better for long-term investments. One of the most crucial options in long term investment plans is term insurance.
Term insurance is a pure life insurance plan that covers the insured person for death risk. In a term insurance plan, the insured person can decide the sum assured, which means the coverage amount of the plan, and the term means the time for which the plan will be active. Based on these two factors, the insurer will inform the policy buyer about the premium that he/she is supposed to pay. In case the insured person dies while the policy is active, the insurance company pays the sum assured to the nominee stated in the insurance agreement. The premium paid for a term insurance plan is allocated towards mortality charges.
Major features of the best term insurance plan–
Apart from understanding the benefits, you also need to understand the basic features and terms included in term plans.
Term – Term means tenure of a term insurance plan. The tenure typically ranges from 10 to 40 years with respect to the age of the insured person.
Sum assured and premiums – Term plans are very popular because of the sum assured they offer at low premium rates. The premium rates of term insurance plans are lower than other plans like investment-linked life insurance plans, etc.
Claim settlement ratio – Claim settlement ratio is the number of times the insurance company successfully settles the claim in comparison to the number of claims filed by insured customers. It is important to check the insurance company’s claim settlement ratio before buying a term insurance plan as it helps in understanding whether the company is reliable or not.
Riders – Not every risk is covered under a basic term plan. However, you can buy add-on features, also called riders, that offer you special benefits for specific risks by adding a few more bucks to the premium rate. Some of the common riders are critical illness rider, waiver of premium rider, accidental death rider, and disability rider.
Types of best term insurance plans
Basic term insurance plan – A basic term plan or level term plan pays the coverage amount to the nominee on the death of the insured person during the term tenure.
Increasing term plan – In this plan, the sum assured increases every year.
Decreasing term plan – In this plan, the sum assured decreases every year.
Monthly income plan – This term plan pays the insured person’s family a specific amount every month and partly in a lump sum in case of the policy holder’s death.