7 Unique Term Plan Features You Should Be Aware of

While buying the Term Plan, most individuals only focus on the life cover and the premium amount and choose the plan that has the lowest premium. However, Term Plan has several features, some of them you might not be aware of, but knowing them will help you choose the right plan for you. Here are 7 unique term plan features you should be aware of:

1. Term Insurance is the most cost-effective life insurance:

A term plan offers a death benefit in case of the sudden demise of the policyholder during the policy term. However, unlike traditional life insurance, it does not provide any benefit in case the policyholder survives the policy term. The premium is substantially lower compared to traditional plans. It enables you to get the maximum sum assured at an affordable premium, which is why term life insurance policies are gaining popularity among millennials.

2. You can choose to receive your premium back:

Many insurers have started offering Return of Premium Term Plans. Return of Premium Term Plan provides the death benefit just like a regular Term Plan; however, the premiums paid towards the policy are returned to the policyholder if the policyholder survives the policy term. In the case of a regular Term Insurance, the policyholder pays the premium, and the insurer pays the sum assured only in case of the demise of the policyholder, but in the case of a Return of Premium Term plan, the policyholder receives the entire premiums paid (after deducting the taxes) in case he/she survives the policy term. Otherwise, the nominee will receive the death benefit upon the policyholder's demise.

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3. It offers flexible payout options:

Contrary to the traditional belief that life insurance offers payout only in a lump sum, nowadays, many term insurance plans offer flexible payout options. Here are some common payout options that can be chosen based on the requirements of the nominee/s:

• Lump-sum payout option: In case of an event of death of the policyholder, the nominee receives the entire payout in a lump sum.

• Lump-sum plus fixed monthly payout option: This option offers the entire sum assured in lump sum along with a fixed monthly income for the next few years (as selected by the policyholder at the time of purchasing the policy) upon the policyholder's demise. Some plans offer a part of the sum assured as a lump sum and the rest amount as monthly or yearly income. However, the premium for the lump sum plus fixed monthly payout option is comparatively higher than the regular lump sum payout option.

• Lump-sum plus increasing monthly payout option: To counter the inflation, you get the option that offers 100% sum assured in a lump sum and increasing monthly income (which typically increases by 10% every year) for the next few years after the policyholder's demise. Similar to the fixed monthly payout option, some insurers offer a part of the sum assured as a lump sum, and the remaining part is offered as an increasing monthly income. Since the monthly income keeps increasing, the premium is higher than the lump sum plus fixed monthly payout option.

4. It offers flexible payment options:

As you might be aware, most Term Plans offer easy payment options. You can pay the premiums monthly, yearly, half-yearly, or quarterly at your convenience. Not just that, but many insurers offer the option to choose your paying term. So, if you want to buy a Term Plan with a tenure of 20 years but are not sure of your financial condition after 10 years, you can choose to pay the premium only for 10 years. Undoubtedly, the premium you pay in the premium paying term of the first 10 years will be high as you will not be paying any premium for the next 10 years. This option is suitable for people who are going to retire after a certain age and want to pay only until they have a fixed income but need life cover even after retirement.

5. You can increase your insurance cover at different life stages:

With increasing age and lifestyle changes, our financial objectives change over time. Besides, the rate of inflation is constantly going upward. In such a case, the sum assured that seems adequate to you at this moment might not be sufficient for your family if and when they have to make a claim. If you have these concerns, an Incremental Term Plan is the right choice for you. Incremental Life Cover can be bought as a separate Incremental Term Life Insurance Plan or as an add-on. In this plan, the life cover gets increased by a fixed amount every year. The fixed increase can be calculated by considering your future financial objectives and the rate of inflation. The Incremental Term Plan can be highly beneficial to you and your family as it can beat inflation and ensure your family receives adequate funds to meet their financial objectives even in your absence. Click here to read more about the Incremental Term Plan.

6. Add-ons and riders can turn your basic plan into an advanced plan:

Term Life Insurance offers several add-ons and riders that can turn your basic policy into a wholesome insurance policy. They are the additional benefits that can be availed by paying a slightly higher premium. You can easily customise your basic term life insurance policy by adding certain riders as per your requirements. However, before adding the add-ons and riders, it is crucial to analyse your lifestyle, understand the potential future risk, and choose the riders/add-ons accordingly. Some of the popular riders and add-ons are Accidental Death Benefit, Waiver of Premium, Accidental Disability, Critical Illness Cover, etc. Click here to read about the 7 important riders to buy with a Term Life Insurance Policy.

7. You can buy a Joint Term Plan with your partner:

A Joint Term Insurance Plan is a type of term plan that extends its coverage to the spouse of a primary policyholder. The plan ensures the financial stability of the household in case of the unfortunate demise of either or both of the joint policyholders. The policyholders are required to pay a single premium that offers coverage to both policyholders. Just like a Regular Term Plan, you will have to pay a premium for a chosen term; failing to do so will result in a policy lapse. In case of the demise of one policyholder, the sum assured is offered to the spouse, and in the case of the demise of both the policyholders, the sum assured is offered to their children or nominee. Although the Joint Term Insurance Plan is ideal for married couples and is mainly bought by married couples, it can be purchased by any two individuals in any relationship. Click here to read what is a Joint Term Insurance Plan and its benefits.

To Conclude:

Buying a Life Insurance Policy for the first time can be overwhelming. But, the time you spend understanding your requirements and doing thorough research to find out the right insurer and suitable policy is worth it. Furthermore, make sure you carefully read and understand all the features, benefits, terms and conditions, list of exclusions and inclusions, policy exemptions, etc., to avoid any disappointment or dispute in the future.

Warm Regards,
Ketki Jadhav
Content Writer