Tuesday, September 22, 2009
Life insurance is about protecting our near ones and securing their financial future. And from that perspective, amongst all life insurance products, term insurance is the most effective, the most cost efficient and is also the simplest form of protection.
Term cover provides pure life cover, wherein the individuals dependents get the sum assured on the death of the policyholder within the specified period, in return for a stipulated amount paid during such term as premium. A pure-term product provides no returns on maturity. This helps keep the premium pretty attractive.
Types of term insurance policies
Single premium plan: The name is self explanatory. The premium is paid once and for all. The one time premium will cover the individual for a stipulated period of time.
Regular premium plan: If you are unable to make the payment at one shot, you would take to paying a stipulated amount every year till the end of the insurance term.
Term plans with return of premium: The policy operates in a similar vein to the plain vanilla plans discussed above; however, should the policyholder survive the term, he/ she would get back all the premiums paid. This could be with or without interest, depending on how the plan is designed. The premiums herein will be significantly higher than the plain vanilla plans.
Mortgage cover term assurance: This is merely a cover against an outstanding loan amount; it progressively decreases inline with the loan repayment pattern. Often, such policies have a limited premium payment term and in such cases, an equated premium is spread across a part of the term for which the loan is covered. This policy ensures that in the unfortunate event of death, the family will not be burdened with the debt repayment.
Choosing the right term plan
Most plans available in the market broadly offer the same set of features, hence making it easy (or difficult!) to choose. The common factor on which the comparison should be made is the premium that has to be paid by the policyholder. The lowest quote should be availed for the longest term -- this is easy on your pocket and it serves the purpose of insurance.
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