A personal insurance plan is certainly the order of the day when you want to mitigate different types of risks. Insurance also plays a crucial role in your financial planning for the future. Several factors come into play when you are deciding on an insurance policy that works best for your needs. Make sure you carry out a little research of the offerings from the best insurance companies to understand how different kinds of insurance work.
A life insurance plan is meant to insure a person’s family or dependants in the event of his or her death in any circumstance, be it natural or accidental. There are traditional life insurance plans and term plans, both of which have their own set of features, and the one you opt for will depend on your situation.
Term insurance plans are the life insurance policies that cover the life of an insured person for a specific period. In the event of the death of the policyholder, the benefit in terms of the sum assured is passed on to the beneficiaries who are usually the immediate family members of the deceased. Life insurance plans are also known as an endowment, whole life or money back insurance plans, and these are the oldest kind of policies that carry a benefit for investors who believe in making risk-free investments. Many of these traditional plans aim at providing fixed sum assured and an accumulated bonus.
Term insurance is considered the cheapest and simplest form of life insurance for they have no frills attached to them. Term insurance plans have the sole motive for insuring the life of the person, and there are no maturity benefits. No investment is attached to term plans, and the premium payment is purely towards securing your dependants from the financial jolt they might otherwise get in the event of your untimely death.
Since the plan covers death only and there is no form of payment made at the end of the tenure when the policyholder survives, they can be availed at low premium rates, and you can ask your insurance provider for the best term plan insurance quote. Moreover, the premium you pay towards a term insurance policy is counted for income tax benefit deduction under Section 80C of the Income Tax Act, 1961. The sum assured is paid to your nominee, in the event of the death of the policy-holder, is also tax-free under Section 10 (10D) of the same act.
As you already understand by now, both term plans and life insurance plans are for different purposes. If you need an investment plan along with a lifetime insurance cover, you can go for a whole life or one of the latest endowment insurance plans. Term plans are temporary, and the coverage lasts only as long as the tenure of the policy unless you go for timely renewal.
Term insurance policies are suitable for people requiring a large cover to protect the dependants. This is particularly the case with sole breadwinners. Choosing term insurance is a good idea in the earlier stage of your life when you are building your career blocks or setting up a business, raising your kids or paying off a loan or mortgage. This helps your dependents get financial security in the form of the sum assured if you die an untimely death. The premiums are lower and suit your budget more when you want to make a limited annual spend.
The best thing about term insurance plans is that they can be renewed or converted for a permanent coverage at a later stage when you are in a position to make higher premium payments and wish to diversify your investment portfolio. A medical check-up is usually not required at the time of conversion unless the insurance company deems it necessary for some reason. However, if a person who does not have any life insurance chooses to buy an endowment policy at a later age, he will be required to go through an intensive medical check-up, and he/she will becomes eligible only after satisfying a set of predetermined parameters that vary across insurance providers.
Since a choice between term and life plans is determined by individual situations, you need to turn to the services of an expert to decide which plan to choose at the stage of life you are in. Coverfox.com is your one-stop destination for all insurance needs, and one of the experts will always be there to guide you to make the right decision in the interest of you and your loved ones.