Should I buy Term Life Plan?
We are advised by people around us that one should have the insurance. After hearing frequent advices, when we make our mind to have insurance, one question arises against us. What kind of insurance should I buy?
We approach any agent or we search in Google to get answer of the question. You must keep in mind that there is nothing best or worst in insurance plan. Each plan has its distinctive advantages and disadvantages. If you choose the plan which best suits to your need, the plan taken by you is the best, otherwise the worst. Each person has different financial position, different need of insurance and different intention of taking insurance. Even the same person’s financial position, need of insurance and intention of taking insurance changes as time changes.
Before buying an insurance plan, you must research and analyze for various insurance plan and your need and intention of insurance. Today we came with an article, which gives you in depth knowledge of term plan. After reading this article, you can decide should I buy term life policy or not?
Term life insurance policy
Term plan is a life insurance which guarantees coverage at a fixed rate of payments for a pre-decided term of life. Once the term is finished, the policy will be expired. There will be no insurance cover. The person has to renew for another period or let the policy be terminated.
Basic characteristic of term plan
• Term life plan lasts for limited period of time, generally 10-30 years.
• Term plan has pure death benefit.
Advantages of term Plan
• Term plans are easy to understand. They are simple. Any person can compare different term plan offered by different insurance company on basis of premium and death benefits. Hence, the term plan price is very competitive.
• Term plan offers temporary coverage so the starts up premiums are low compared to other plans.
• The earning member of family can secure future of family by this plan as term plan offers a lump sum payment to family member on death of policy holder. Thus, the term plan can be used to replace the lost income of deceased.
• Term life plan offers wide variety of death benefits. Term life can assure minimum Rs 50,000 to Rs 50,00,000
• Term life plans are tax free. Money used to buy term plan are tax free and money received on death of policy holder to family member is also tax free.
Disadvantages of term plan
Benefits of term plan are itself drawbacks. What to consider? Benefit or drawback is depending on circumstances.
• Once the term is finish, the coverage of policy expires itself. In fact one takes term plan in his youth, he/she will become coverless at the old age. If you choose to renew policy, you will have to pay higher premiums due to old age.
• Term plan are pure death benefit plan. They are not for investment purpose. When term plan finish, the value of your policy is zero. The payments done by you is only charges to provide you the cover against your death. If no death, there will be no return. Term plan never accumulates wealth. If you want to grow wealth, you should buy other plan instead.
• Once you buy the policy, you have no option to change amount of death benefits even your financial condition changes.
• You have to pay higher premiums as you become older. After the age of 60, no company offers term plan. If any company offers the policy, it will keep some conditions which are not beneficial to policy holder.
• There will be no surrender value of policy. You cannot get loan on term life policy.
Term plan is good for that person who has limited income and needs a large cover to secure his family’s financial future in case of his death.
We have also discussed should I invest in Money back Policy in previous article. The person should buy term plan instead money back plan. Why? The reason is clear. Term plan is the cheapest way to protect your future income from the risk of your dying before you have earned it. But buying this cheapest insurance, you can use your precious money in other investment like mutual fund or stocks which gives higher return than money back.