How A Term Plan Does A Lot More Than Just Insure Life

By Adhil Shetty | February 25, 2017

How A Term Plan Does A Lot More Than Just Insure Life

As we approach the end of the financial year, many of you will be looking to buy Life Insurance products in order to claim tax deductions before March 31. If you haven’t finalised your insurance purchase yet, we suggest you give Term Insurance a chance this year.

A Term Life Insurance plan is a plain life cover with no maturity or investment benefit. It comes with low premiums and offers large life covers. For example, a 30-year-old salaried male with no tobacco habit and earning Rs. 5,00,000 annually can avail a term plan worth Rs. 50 lakh for 20 years for premiums starting from Rs. 3,500 a year.

Term plans can also have many useful add-ons and riders that make them much more useful to the insured and their dependents. Let’s take a look at the many ways in which you can buy a term plan with an impressive set of riders and add-ons.

Additional Reading: Top 10 Popular Insurance Plans of 2017

Your Nominees Can Get A Monthly Income

Term plans provide the option of paying out the sum assured as either a lump sum or as monthly payments. Additionally, term plans can also provide a monthly income over and above the sum assured. This is an add-on feature which pays a fixed percentage of the sum assured as monthly income for a fixed number of years.

For example, if your term plan has a sum assured of Rs. 1 crore, the monthly income add-on pays out 0.5% of this sum – i.e. Rs. 50,000 – every month for 10 years, over and above the Rs. 1 crore.

Not just this, this monthly income add-on also comes with an increasing income option, wherein the monthly income rises by a fixed percentage – say, 10% – at the end of every year.

For example, if the monthly income is Rs. 50,000 in the first year, it will be Rs. 55,000 in the second year, Rs. 60,500 in the third year, and so on. This would shield your dependents against inflation.

You Can Take A Joint Policy

If you’re looking to save premium costs, term plans provide the option of a joint policy where the insured and their spouse can both be part of the same Insurance plan. Both lives are covered under such a plan, subject to terms and conditions.

Additional Reading: Your Guide To Joint Life Insurance

You Can Have Several Nominees

In a term plan, you have the option of naming one or more nominees for your sum assured and added benefits. This may help you allocate chunks of the sum assured to different dependent persons as per each person’s need.

For example, a man can nominate his wife and dependent parents to claim 50% each of the sum assured.

Get A Cover For Accidental Death & Accidental Disability

Through these riders, the insured’s nominees are paid the sum assured in case of the insured’s accidental death. This benefit is over and above the basic sum assured. The insured can also avail an accidental disability rider in which temporary or permanent disabilities caused accidentally can be covered.

Such riders are useful to any person with a higher exposure to risk of accident. For example, someone required to drive long distances on highways can be considered at risk.

Bonus Read: Should You Buy A ULIP?

Cover Critical Illnesses

Using this rider, the insured receives a lump sum if he is diagnosed with a critical illness as defined under his policy. Each insurer has their own definition of what a critical illness is. Therefore, you must study your policy document carefully to understand which illnesses it is going to cover.

The treatment of a critical illness can span several months and this can drain a family’s savings. But with an insurance cover against such illnesses, the insured may not have to worry about managing money during the treatment.

Have A Terminal Illness Benefit

Some term plans have a terminal illness benefit. Under this, if the insured is diagnosed with a terminal-stage disease, the insurer pays out part or whole of the sum assured and does not wait for the person’s inevitable death.

Get A Premium Waiver

Some term plans waive your premiums in case you suffer a disability, a critical illness or terminal illness. Your policy continues to remain in force as a paid-up policy.

Get Your Premium Back

Term plans don’t have a maturity benefit, except a premium return term plan. If you survive the insurance term, you get your premiums returned to you. Due to this feature, premium return plans offer a lower sum assured than regular term plans.

If you are a person with dependents and responsibilities, opt for a Life Term Insurance plan. It will safeguard the long-term financial interests of your dependents. If you are set on buying a term plan but haven’t finalised your purchase, go online to compare various insurance products and buy the one best suited to your family’s needs.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit for the latest rates/offers.
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About Adhil Shetty

Adhil Shetty is the Founder and serves as the Chief Executive Officer of Adhil has a Master’s degree in International Relations with a specialization in International Finance and Business from Columbia University in the City of New York, and a Bachelor’s degree in Engineering from the College of Engineering Guindy, Anna University. Adhil is an expert in Personal Finance (Car loan/Home loan and personal loan) and he majorly consults on investment and spends rationalization for the Indian loan borrowers. His guidance is number based with real time interest rate calculations and hence useful for consumer’s real time query.

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