The common belief that there is no need for financial planning in the early stage of life is fictitious.To be financially prepared for contingencies, it is advisable to begin investing once you start earning a reasonable amount of money. Though you might think investing is needless currently, but do remember that you cannot sense the uncertainties and mishappenings in advance.
To start with, you can invest in simple life insurance products such as term insurance, as it involves a lower premium and higher sum assured. Also, it will keep your family financially protected in your absence.
In this fast-paced life, to beat the odds of uncertainty, it is preferable to buy a comprehensive term plan for wider life coverage. Before that,It is essential to understand what is term plan and the documents required for applying for the same.
A term insurance plan is an easy and pure life insurance product. The insurance provider provides financial compensation equal to the sum assured to your family in case of your untimely demise. Also, you can avail of coverage against critical illnesses and accidental death by choosing appropriate rider options.
While applying for the best term plan, you need to keep a few documents ready and disclose everything in your application form to ensure hassle-free claim settlement later.
- Identity proof (Passport/Aadhar Card/Voter's ID
- Age proof
- Address proof
- Income proof
- Medical reports (To analyse your current health and future medical risks)
Apart from knowing what you need for the best term plan, you should be aware of the term insurance benefits and different premium payment methods in detail.
Term Insurance Benefits and Different Premium Payment Methods
1. The Convenience of Different Premium Payment Methods
a. Regular payment Option
Under this option, you need to pay your premium at regular intervals throughout the tenure of your policy. You can choose the intervals as per your convenience, i.e. monthly, quarterly, half-yearly, etc.
Also, if you choose this option, the duration of your premium and the tenure of the policy are the same. It is one of the most preferred options as you can spread your premium payment and not burden your finances at any particular point in time.
Plus, you can discontinue your policy once you have paid all your liabilities and are sure about the financial independence of your loved ones.
b. Limited Payment Option
Under the limited payment option, you can pay the premium for a shorter period of time and enjoy the coverage for a longer period of time. Ideally, this option is beneficial for two categories of people:
For people who will be retiring before the term plan expires
For people who have had a sudden hike in their income. Usually, such people don't want to pay the premium for a longer time.
c. Single Payment Option
Before choosing this option, you should consult an expert for having a fair understanding of it. Under term insurance, the single payment option might be less expensive than the regular payment option, but this might not be the case every time, as inflation plays an important role.
If you make your payment in one go while ignoring significant factors like the time value of money, you might land up paying more than you would be paying under the regular payment option.
2. High Sum Assured at Affordable Premium
Term insurance is considered one of the most preferred choices of life insurance due to the advantage of an affordable premium. However, the earlier you start investing, the lower will be premium, and higher will be the sum assured. No matter which of the best term plan you decide to invest in, it's always better to start as early as possible.
The premium amount might increase with your increasing age but will still be affordable and pocket-friendly. Also, it is advisable to buy term insurance online, as it is comparatively cheaper than offline insurance.
3. Easy to Understand
As it is a pure life insurance cover, term insurance is easy to understand and does not require an in-depth understanding of the market movements. However, it is essential to read and understand the terms and conditions of the policy to be aware of your policy's exclusions.
4. Additional Rider Benefits
A basic term insurance plan has certain exclusions. To cope with these, you can opt for add-on benefits with the basic cover to have broader coverage. However, the best term plans also include a number of rider options available; find below a few of them:
- Critical Illness rider
- Accidental Death Benefit
- Accidental Disability Rider
- Waiver of Premium Rider
5. Tax Benefits
Under Section 80C of the Income Tax Act, 1961, you can avail of tax benefits on premium payment of up to Rs1.5 lakh per annum. The premium amount will be deducted from your taxable income.
While understanding and checking through the above-mentioned benefits, you should not underestimate the importance of choosing a credible insurance provider.
To ensure unparalleled services and support, it is inevitable to choose a service provider offering insurance products with favourable terms and conditions and a good claim settlement ratio. If you face any difficulties throughout the process, you can take the assistance of the customer care executives.