TERM INURANCE PLAN:
Term insurance plan is a form of life cover, it provides
coverage for defined period of time, and if the insured expires during the term
of the policy then death benefit is payable to nominee. Term plans are
specifically designed to secure your family needs in case of death or
uncertainty.
The
premiums for Term insurance policies are the lowest among all the types of life
insurance policies. The premiums are low since there is no investment component
and the entire premium goes for covering the risk. So if the policy holder
expires during the insured term, the death benefit is paid to the nominee.
There is no survival or maturity benefit
once the policy term expires.
There
may be some plans that offer to return the premiums paid by the policy holder
if he survives.
ELIIBILITY CRITERIA : generally minimum age 18 years and maximum
age is 65 years. But the eligibility criterion for term insurance plan varies
according to the insurers.
Insurance amount or cover amount: Generally insurance company provide a cover amount which
is equal to 10 or 20 times of your annual income without any prove of income.
E.g. if your annual income
2,50,000/- in a year. You can buy a term plan with cover amount ( 2.5lakh X 10)
rs. 25,00,000/- (twenty five lakh).
If you need to say rs.1crore term
plan, in this case you must show you income proof. That may be range 5lakh to
10lakh depending upon insurance company policy.
Now let point out some question
which remove all doubts about Term paln.
1. How to choose a best term plan?
To choose best term plan you should
consider important factors like:
a) How good is the insurance company
(compare goodwill and market holding among varies companies)
b) How much cover do you need (like
10lakh, 50lakh, 1crore etc.)
c) Check the claim settlement ratio
(ratio higher will be better)
d) The factors of inflation in
paying the premium and coverage benefits
e) Compare the terms and conditions
of various insurance companies
f) You can take two term insurance
plans from two different insurance company, it will save you in case of
rejection of claim from one of either two companies
g) Do not just look for the low term
insurance plan as they might be an important factor but may have several
conditions attached for the time of claim
h) You can also go for an online or
offline term plan
2. Do term insurance plan have an
option to convert it to other traditional plans?
Many Insurance companies can provide
the convertible option to you in term insurance plan, and you can convert it to
the whole life insurance policy or the endowment plan any time during
policy tenure without additional charges.
3. If I missed a premium, is there a
chance that my policy may lapse?
If you miss the premium then the
first thing is to know the status of your policy through your agent or
insurance company.
According to Life Insurance
Corporation of India (LIC) a grace period of 30 days is allowed where the mode
of payment of premium is yearly or half yearly and 15 days in case of monthly
payment.
4. Can I surrender an insurance
plan?
Yes, you can surrender an insurance
plan that is to exit from a plan before maturity. No charges are levied
if the surrender is done after five
years.
5. What are the smokers and
non-smokers criteria in the term plan?
It includes the smokers or users of
any tobacco products, such as chewing tobacco etc. Some smokers who have quit
smoking are also eligible for favourable premiums. However the period varies
among insurers.
6. What is difference between a
participating and non-participating policy?
A participating or profit policy
would enable the policyholder to share in the profits of an insurance company
which depends on the investment returns of the insurance company. In
non-participating policy there is no profit sharing with the insurance company.
7. Will I get a tax benefit on the
insurance premium?
Premiums paid for all life insurance
policies are exempted from tax up to a maximum of Rs 1.5 lakh under Section 80C
of the Income Tax Act, 1961. The claim amount received by the beneficiaries or
bonus in the hands of the policyholder is tax free under Section 10 (10D) of
the Income Tax Act.
