In the recent times, term insurance plans have become quite popular. But should that be the reason for you to go ahead and buy a policy? Certainly not. As is the case with anything, you need to assess if the policy fits into your needs and requirements list. To understand the same, knowing what a term plan is a great starting place.
An LIC term plan or any term plan for that matter, is the simplest insurance policy that you can buy. Here, a policyholder pays a certain amount as premium and in return, the insurer offers life cover for the individual. Should the policyholder lose his/her life during the term of the policy, the insurer will pay the sum assured to the nominees of the policy. If the policyholder outlives the plan, there are no financial benefits.
What makes a term plan so special, is its ability to offer you huge sum assured for life at nominal prices. Since a term plan does not have a saving or investment component, the entire premium is utilized in offering life cover. Now that we know how simple and effective a term plan can be, wouldn’t it be amazing if a term plan was available with the most respected insurer in the country?
Well, you can buy an LIC term plan to secure the financials of your loved ones from any unexpected mishap in the future. To be able to pick the right plan for your needs, you can use the following steps.
- Right Coverage
It is extremely crucial to buy an LIC term plan with the right coverage. An under-insured policy will do no good for your family at the time of need. Thus, spend some time to assess the right sum assured. You can start by calculating the average monthly expenses of the family. You can then factor in all the liabilities against your name. On the top of these, you can add some buffer amount as well, for the “just in case” thoughts.
- Right Duration
After understanding the sum assured, it is important to know the right duration for your LIC term plan. The general rule of thumb says that a term plan is necessary during the most responsible years of your life. If you have bought a house, a vehicle and have a personal loan, your 40s and early 50s are going to be the age with most responsibilities. Ensure that your term plan covers this age band.
- Right Add-on
When you opt for an LIC term plan, you have the option of adding riders or add-ons to your policy. The main intent of doing so is to enhance the capabilities of your term plan. Though they add a lot of value to your policy, they are not mandatory by any means. Take some time to assess which all add-ons will help you in the long run and add them to your policy.
Risks of LIC Term Plans
An LIC term plan follows the standard rules and regulations of all term plans. Meaning, the overall structure and basic risks covered or benefits offered remain the same. Since a term plan has a very limited focus, it is not all that difficult to understand as well. An LIC term plan covers only one risk, the death of a policyholder.
If a policyholder loses his/her life during a policy’s period, the insurer is liable to pay the sum assured as per policy documents to the nominees. However, if the policyholder lives through the term, there are no financial benefits associated with the plan.
Benefits of Buying LIC Term Plan
As mentioned earlier, there are a lot of reasons which make term plans as popular as they are. Apart from the very obvious high life cover and low premiums, there are several other benefits as well. Here are a few benefits of buying an LIC term plan.
- Offers financial stability or security for the family in the event of the death of a policyholder.
- Offers a free look in a period of 30 days.
- Has one of the highest claim settlement ratios in the industry at 98%.
- Non-smokers will end up paying a slightly lower premium as compared to smokers of the same age group.
- The policies are available for people as young as 18 years and as old as 75 years.
- You can buy the plan either online or offline.
- LIC lets you convert an LIC term plan into other traditional life insurance plans.
Investing in an LIC term plan is highly recommended as it can be one of the smartest additions to your financial portfolio.