Bust The Myths Keeping You From Buying A Term Plan

A term plan has many known benefits for its takers, even so, there are many term plan myths surrounding it. Today, we are going to break some of the myths you might have heard of and expose the facts, to help you make a wise and well thought of decision.

Myth: “Life Cover should be equal to my current annual income”

The main purpose of a term plan is to cover your family’s finances if something were to happen to you. In that case, if your cover amount is as much as your yearly income, it will only be able to sustain your family comfortably for a year, after which they will be forced to make cuts in their lifestyle. Therefore, essentially your cover amount should be no less than 10 times your annual income. You can also assess what your ideal cover should be by calculating your Human Life Value (HLV).

Myth: “My assets will cover my family, I don’t need a term plan”

Unless most of your wealth is kept in a savings account, your assets may not be helpful to your family immediately after you are gone. Assets like gold, property, stocks, fixed deposits etc. do not have the necessary liquidity required in times of need. In such cases, a term plan proves highly beneficial.

Myth: “An insurance plan that doesn’t give returns has no value”

A term plan provides you with a high life coverage at a very nominal cost. It provides your family with an umbrella of security at very low premium rates, and you can also avail the benefit of premium returns when the insured person opts for a rider benefit. Therefore, as far as value goes, a term plan has plenty of it.

Myth: “I cannot increase the cover of a term plan”

This here happens to be one of the biggest myths surrounding term plans. As you age, your responsibilities may change and the number of people dependent on you may also increase along with your income. In such a scenario, you can increase the cover provided by your term plan at an additional cost, and need not opt to buy a new term plan altogether.

Myth: “It is difficult to buy term plans online”

A lot of people have a misconception that buying a term plan online is complicated and unsafe, however, that is far from the fact. Purchasing a term plan online is super easy and completely hassle free; A few clicks is all it takes. What’s more, you also save precious time and money when buying a policy online.

From the above myth busters, it’s clear that buying a term plan has many benefits, low premiums to name one. So, go ahead and get a term plan that best suits yours and your family’s needs.

Term Insurance Or Life Insurance – Which Is Better?

When it comes to purchasing an insurance, most policy buyers are unsure whether they should purchase a term insurance or a whole life insurance. If you belong to this group of confused buyers, then keep reading.

To help you make a well thought decision, let us begin with getting a better understanding of what each type of insurance means.

Term Insurance

The name term insurance itself suggests that this kind of insurance is only valid for a specific period. A term insurance offers death benefit to the nominee of the deceased insurance holder, however, if the insurance holder survives the insured period then he receives no maturity benefit. Term insurance also has lower premiums as opposed to its counterpart, however the premium amount keeps increasing with time.

Whole Life Insurance

Whole life insurance is also known as permanent life insurance, and this kind of insurance comes with death benefit along with an income benefit. Here the tax exempted cash accumulated over time can be used by the policy holder as he deems fit, or even saved for retirement. However, as opposed to term insurance the premium amount in whole life insurance is much higher, but it does remain fixed throughout.

Now that we know what each insurance means, let’s find out which one is more suitable for you.

Which insurance should you buy can be answered by considering factors such as your age, purpose of buying the insurance etc. For someone in their 20s it makes sense to opt for a term insurance policy which can later be converted into a whole life insurance, by doing so one can reap the benefit of low premiums early on in life. However, someone in their 40s should consider purchasing a whole life insurance policy to help secure the future of your dependents as well as give you a cushion for retirement.

Consider these factors before making your decision and set out to understand both types of insurance completely before purchasing your policy.

5 Tips To Help You Choose The Right Term Insurance Plan

Life is full of unpredictability, and hence a life insurance plan acts as a much-needed cushion against the uncertainties of life. However, everyone has his or her own needs, and therefore it is important to choose a term life insurance plan that covers those specific needs. But, before we get into the nitty-gritty of choosing the right term insurance, let’s first understand what term life insurance is.

What is Term Life Insurance?

The name term insurance itself suggests that this kind of insurance is only valid for a specific period. A term insurance offers death benefit to the nominee of the deceased insurance holder, however, if the insurance holder survives the insured period then he receives no maturity benefit. Term insurance also has lower premiums as opposed to its counterpart, however, the premium amount keeps increasing with time.

Now that we have a better understanding of what term insurance is, here are 5 tips that will help you chose the right term plan

Don’t Fall For Your Peers Words Alone

While other’s experiences are always something to consider, one should also keep in mind that your friend or colleague’s requirement from their term plan can differ from yours. So, before you make your choice it is advisable to evaluate your future goals, liabilities, assets, etc. and then weigh them against the sum assured and only then zero in on the most suitable plan.

Think About Your Present As Well As Your Future

The financial responsibilities a single individual has are different to those of a married man with a family to care for. Since the number of people dependent on you may change with time, it is important to factor them while choosing a suitable term life insurance.

Decide How Long You Want the Cover For

As important as the amount of cover is, equally important is the duration of the cover. A term insurance policy is meant to cover an individual till they retire. So, if you are planning to work more than then the expected age of retirement, which is 60 years, then you need to make sure your term plan covers those extra years as well.

Factor in the Amount Needed for Your Family’s Maintained Lifestyle

The cover you receive should largely be able to help your dependent family members sustain their current lifestyle. Also, while calculating the same, keep in mind factors such as inflation etc.

Look Out For a Good Claim Settlement Ratio

At the end of the day, what matters most is that your family is protected if anything were to happen to you. Therefore, it is wise to have a look at the claim settlement process of your insurance company as well as the ratio of claim settlement when picking a term life insurance plan.

Keep in mind all the above points and make a well-informed choice. We recommend Tata AIA Life Insurance Term plans, read more about the plan.