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The cheapest and the most basic, this is a no-frills life cover that should be one of your first financial instruments. Being a pure insurance cover, it does not return your money if you survive the policy term.
If you don’t, the sum assured is paid to your dependants. So, buy only if you have financial dependants, or you expect to have dependants in the future. If you expect to have dependants till a later stage of your life, look for a plan that has a high maturity age.
Most term plans provide cover till 60-65 years of age. Few even offer plans till age 75.
As there is no surrender or maturity value in these, you should settle for the one with the lowest premium and the longest term.
Since they are simple, term plans can be easily compared on the basis of price and the cover period. Search for a quote from at least four to five companies before buying one.
Recently, a few variants have been introduced in term insurance.
ING Vysya Life Insurance has launched limited premium paying term (PPT) plans. In these, you have to pay a higher premium in the initial years to cover the premiums for the entire term, after which you stop paying altogether. If you think, you can afford higher premiums only for a few years, this plan will make sense for you.
However, it has its drawbacks. In the event of death in the initial years, you would end up paying much more than what you would have paid till that time under a normal plan.
Also, if at any point you want to discontinue the plan in the absence of dependants, you would have paid for the entire term in any case. Switching to a lower cost plan would also be hindered.
DLF Pramerica’s Family Income Plan has come up with another innovation. Unlike a conventional protection plan, where the dependants receive a lumpsum, the plan allows you to choose the monthly financial support system.
Under this, your dependants would be paid on a monthly basis till the end of the plan term.
- Keep the highest possible term
- Keep the maturity age as long as possible
- Talk to 4-5 insurers or visit their websites to get premium rates
- Choose the plan that has the lowest premium at your parameters
- Undergo medical tests, if required
- Keep the nominees informed
- Pay premiums every year