» Term Plan: Best Solution For Insurance

» Previously, Insurance costs much to investor as it includes two major components, one was mortality charges (insurance) and other was investment.         In this case if people pay Rs.10,000 premium, then approx 70% of premium goes for investment where return was not more than 8%. So here disadvantage is on part of investment where people cannot bit even inflation. To come out of all such problem, only solution is Term Plan.

»Term plans have many endearing features. To begin with, they provide life cover for different periods or terms at the lowest possible premium. For instance, a 34-year-old person can get a Rs 25 lakh cover for an annual premium of Rs 9,550 for 25 years, a coverage that will cost him about Rs 95,550 and Rs 162,550 in endowment and money-back policies, respectively.

»  Advantages Of Term Plan :
Term plans are especially beneficial for young people with dependents. Low premiums set you free to invest in high-growth instruments such as equity, Mutual Fund , Debt etc.

Income and assets are generally not high in the early stages of one's career or marriage,but there may be dependents to care for. Later on, as assets build up, one can withdraw from this facility. As the premium is low, it is easier to keep the policy running even during career breaks.

Term covers are especially important if you have a liability for instance if you have taken a car loan or a home loan. So if Mr. A has taken a home loan the tenure of which is 15 years he would need to buy a term cover for 15 years to cover that loan. In case something were to happen to Mr. A during the loan paying period, the insurance company would pay up the   balance loan amount and Mr. A's family would continue to own the house. Else the burden  of paying the balance loan amount would fall on Mr A's family and that would mean a body  blow if the amount is huge. But then with a term insurance expect no bonus or guaranteed additions.

»  How To Buy a Term Plan:
   Agents are often not keen on selling termplans since they earn much less commission from them than, say, unit-linked plans (Ulips). Since term plans have no investment component,   the lowest premium plan qualifies as the best. Information can be gathered from agents or   company Web sites.

Choose the agent carefully -- look for one with experience and full-time commitment to the  job. Rely on referrals by acquaintances.

  »  Downsides Of Term Plan
       Term plans are ideal in most cases, but may not work in some conditions.One such scenario   is when the policyholder believes that hisdependents would not be in a position to take care  of their financial needs in the event of his death after the expiry of the policy. Examples of  such dependents are parents and differently-abled children. In such cases, whole-life cover  can be considered, not a term plan.
       Other disadvantage is person can get advantage of Term Plan till the age of 65-70.