Deepshikha | Apr 9, 2022 |
Considerations Before Opting for a Term Insurance Plan Amid Covid-19
For a person, an insurance policy is more than just a financial investment. It is a symbol of assurance to the individual’s family that they will be well cared for in the terrible event of their death. Everyone should have a life insurance plan in place for this reason.
There are two fundamental types of life insurance plans:
Term Insurance Plans: These are pure insurance plans in which the insured is covered for a specific period.
Unit Linked Insurance Plans (ULIP): These programmes provide investing benefits in addition to insurance benefits.
The 2nd type of plan i.e. ULIP plans are more expensive than the 1st type of plan i.e. Term plans as ULIP offer investment + insurance benefits whereas Term Insurance only offers Insurance benefits.
Most financial gurus prefer Term Insurance to ULIPs because they encourage keeping insurance and investments separate rather than combining them into one plan as ULIPs do.
The following considerations should be examined while establishing the appropriate term plan for an individual:
The appropriate duration of the plan is a difficult subject to answer. The majority of insurance firms offer policies with a minimum of 5 years and a maximum of 35 years.
Although these term plans allow you to renew after the initial term, the renewal is frequently more expensive. As a result, if possible, a person should choose a term plan with a longer-term so that the monthly premium is reduced.
The amount of insurance coverage required is the second most significant consideration. The quantity of insurance coverage required is determined by the family’s anticipated future needs, and the following considerations should be examined while determining the insurance coverage:
Life insurance companies also provide supplementary riders with their policies, such as:
These are not included in the basic term plan, but they can be added by paying an additional cost.
The number of death claims that are authorised by the insurance carrier is referred to as the Claim Settlement Ratio. Not all cases are allowed, and some are also rejected.
The higher the settlement ratio, the better, as it suggests your death claim’s chances of being approved.
Payment options for term insurance plans include annual, half-yearly, monthly, and quarterly payments. The amount of premium that must be paid varies depending on how often it is paid. Annual premium payment options are often the least expensive because you will be sending money to the insurance company all at once.
The premium for a life insurance plan can be deducted under Section 80C of the Income Tax Act, which allows for a maximum deduction of Rs. 1.5 lakhs per year. An individual should determine whether or not the insurance plan he is enrolling in qualifies for a tax deduction.
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