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7 term insurance features that are often overlooked

7 term insurance features that are often overlooked

People often tend to think about insurance only during times of crisis and contemplate what type of plan to choose based on their requirements. Term insurance provides life coverage and a lump sum payout if the insured individual passes away during the policy tenure. Despite its simple terms and policies, term insurance is often underestimated. It comes with numerous benefits, including high rewards and premiums based on current market rates.

Term insurance coverage
The majority of term life insurance policies offer coverage up to 85 years. It is advisable to get a term insurance plan in the 20s to maximize the benefits of any insurance plan. The payout, benefit, and term can be modified throughout a person’s lifespan based on individual needs. Most insurance companies allow the insurer to increase or decrease the life cover. Individuals  have the flexibility to  make changes based on their responsibilities, economic constraints, and needs.  Decisions about  term insurance coverage must consider a person’s lifestyle, age, and financial ability.

Low risk , high reward
Term life insurance is one of the most cost-effective plans. The premium is much lower than other insurance policies and does not include an investment component. Anyone wishing to ensure their family’s financial security after their demise must consider this policy. There is one major limitation to remember: most plans do not repay the premium if the policyholder outlives the term life policy tenure. However, adding a “return on premium” feature to the term plan for such scenarios is possible in specific policies. This aspect is a critical discussion to have with the insurance agent at the time of purchasing a term insurance policy.

Pay till retirement
Insurance companies generally have a maximum age limit of 80 or 90 for term life insurance. However, several  of them  ask individuals to pay premiums until the age of 60, that is, until retirement, since steady income generally stops.  Once the premium payment ceases,  insurees  have the flexibility to  select a long payout tenure, such as up to 90 years, without concern for reduced benefits.  This feature enables individuals to ensure their family’s financial security without  the need to postpone  retirement.

Flexibility in death benefit payout
Term life insurance allows the insured to decide the mode and frequency of payout to the nominee of their insurance policy. By default, it is a lump sum payment made shortly after the  demise of the insured . However, making it a monthly payment is also possible to ensure a regular income stream. This option is the common choice of sole household breadwinners who prefer steady financial support for beneficiaries in the event of their death. This flexibility is a lesser-known and unique feature of term life insurance.

Another essential aspect to note is that some term insurance policies offer coverage for non-working spouses of the insured at a discounted rate to ensure continued financial security after the insured’s death, especially if it was the primary income earner in a family.

Increasing monthly income plan
In addition to the flexible payout method mentioned above, there is the opportunity to pick from other fixed or increasing monthly income plans. Regular income payouts help meet recurring periodic expenditures and close the gap created by the absence of an earning member’s salary. Some insurance companies also sell a combination of both. The insurance company can make a lump sum payment with an increasing monthly payout. The repetitive installments can thus increase between 5-10% per annum. This steady stream can be an option for up to 40 years after the policyholder’s demise. The insurer can set the proportion of the lump sum and monthly payments, which can vary between 25%-75%, 50%-50%, or even 75-25%.

Make the plan comprehensive with  riders
One important aspect of maximizing the value of a term insurance plan is taking advantage of riders or add-on benefits. These hidden features are often overlooked but can significantly enhance the coverage offered by a standard plan. While plans with riders come at a higher cost, they provide valuable benefits that can be crucial in certain situations. For instance, the waiver of premium payments or critical illness rider ensures that the insured individual does not have to make premium payments if they do not become critically ill or disabled. Additionally, the accidental death benefit rider increases the payout in the event of death due to an accident, providing additional financial security for the beneficiaries of the insured.

Easy to manage
Term life insurance  policy is one of  the most uncomplicated and straightforward life insurance products.  There are often no hard-to-understand clauses, few ambiguous terms and conditions, and innumerable benefits beyond payout at the time of death. These include extensive life coverage that covers major expenses like buying a house, taking care of pre-existing loans, or financing higher education or a foreign trip. It is also the most secure of plans as it ensures financial security even after the death of the primary earner in the family.

Term Insurance is one of the best plans, considering the flexibility in claim settlement ratio, payout method, and fluidity in payment and coverage decisions.  Most people  are unaware  of these unique features and thus choose other insurance plans that might not be as beneficial.  Interested individuals should decide about term insurance based on their family needs and financial conditions. The best way to get the most out of an insurance policy is to learn about the lesser-known features of term insurance that are often overlooked.

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