Term Plan

What Is A Term Plan?
It is the simplest and most basic type of life insurance policy. The contract signed between the insurer and the insured says that while the insured will pay a premium, his nominee will be paid a sum of money if he dies during the term of the policy. There is no provision for the insured to save and, hence, he does not get any money back at the end of the term. Since a term plan only involves risk cover, it gives protection at the cheapest cost.

How Can I Pay Premiums?
Premiums can be paid either as a lump sum (the single premium mode) or at regular intervals. The regular premium can be paid annually, quarterly or every month. The regular premium remains the same throughout the term.

Can Get My Premiums Back?
In a term plan, the insured does not get any money at the end of the policy term. Premiums are returned on maturity in ‘return of premium’ policies, which have higher premiums.

How Should The Sum Assured And Term Be Chosen?
As the sum assured is expected to take financial care of the insured’s dependents if the need arises, it should depend entirely on the financial liabilities of the insured. The cover should ideally be around six times the annual income of the insured and take care of liabilities like loans. For the insurer, the income and health of the buyer determine the amount of cover it can offer. Insurers usually offer 20 times the annual income of the insured as cover. The insured may be asked to take a medical test if he wants a higher cover. Iif the insured buys the cover, the insurer pays for the test. the insured refuses the cover, he has pay for the test. The term should depend on the age of the buyer. Ideally, the cover should be available till the insured retires or till he anticipates his dependents would be capable of fulfilling their financial needs. generally provide terms of anywhere between five and 30 years.