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Pure term insurance plans: all you need to know

Pure term insurance plans

A pure term insurance plan is a traditional life insurance product that provides financial coverage to an insured’s family in the event of his death. The tenure of these policies can range between 10 and 50 years. They offer higher covers at relatively low premiums and do not offer any maturity benefits if the insured outlives the policy tenure. Insurers also refer to these no-frills attached plans as pure protection plans given the features and benefits it has to offer.

50-years old Raveesh is a tobacco smoker who works as a manager in a textile plant. He has an 18 year old son and a 22 year old daughter. Raveesh’s daughter finished her education a few months ago and is looking out for a job. Raveesh wants to fulfil the responsibility of his daughter’s marriage at the earliest and asked his wife to keep an eye out for any good matches. Amidst this process, Raveesh died of a sudden cardiac arrest one day, and his family felt helpless. However, the family was approached by an insurance executive informing them of the 20 year term insurance cover of Rs. 1.5 crore that Raveesh bought a decade ago, and that this amount was payable to his family as death benefit. The amount comfortably covered expenses not just towards his daughter’s marriage but also his son’s higher education.


Here are some of the features and benefits of pure term insurance plans:

  • Choice of Plan: Insurers offer policyholders a choice of plan types that they wish to opt for. Depending on individual needs, one can opt for a single or joint pure term insurance plan by extending the coverage for their dependents such as the spouse.
  • Higher Coverage at lower premiums: Such plans offer higher protection covers at the lowest possible premiums available across the insurance space. This makes these term plans an inexpensive way to provide financial protection to the insured's dependents in case of his absence. It is advisable to choose a coverage amount that’s at least 10-15 times the annual income of the policyholder.
  • Death Benefit: In the event of the death of the insured, the nominee is eligible to receive the coverage amount chosen at the time of policy subscription, as death benefit. However, the payment of death benefit is subject to cause of death and pure term insurance plans do not pay any death benefit to the nominee in case of death caused due to suicide, narcotics, act of war or terror, or accident during extreme sports, etc.
  • Flexible Payment Choice: These plans offer several premium payments’ plans to suit the convenience of the policyholder. Premiums can be either limited or single, or regular pay plans. Policyholders with limited or regular payment options can pay the term plan premiums on an annual/semi-annual/quarterly/monthly basis.
  • Tax Benefits: Policyholders can avail tax exemptions on premiums paid towards the pure term insurance plans under section 80C and section 10(10D) of the Income Tax Act 1961.
How to choose the right plan

There is a deluge of term insurance plans in the insurance market and each of these plans offer varying features and benefits. Sifting through these numerous policies to picking the right plan that meets your requirements and fulfils your needs is a grave challenge. Here are a few things that one needs to be mindful about while choosing a pure term insurance plan:

  • Insurer Credibility: When picking a pure term insurance plan, it is recommended to go with an insurer with a proven capability of managing the policyholder’s fund and reputation in the market. This is crucial since the term insurance is a long-term investment and the policyholders would not want to be stranded with a troublesome or unreliable insurer.
  • Claim Settlement Ratio: Claim settlement ratio is a marker of number of claims successfully settled out of 100 claims received by the insurance company. Insurers with a healthy and higher claim settlement ratio are considered reliable and thus would be favourable choice for picking the pure term insurance policy.
  • Get a Quote: It is important to get a quick quote from the prospective insurer before purchasing the plan. The quote gives an individual a clear picture of coverage and premium amount depending on one’s age, salary, smoking habits, etc.
  • Premium Cost: The premium amount payable for eligible term cover is a pivotal factor in deciding the choice of pure term insurance policy. Given that the policyholders shall be paying premiums for longer tenures such as 20 years, it is prudent to choose pure term plans that offer reasonable covers at lower premiums.
  • Online purchase of pure term insurance plans such as Future Generali Flexi Online term plan reduces the premium costs considerably depending on the individual’s health and lifestyle. This plan offers a basic life cover that provides the nominee with a lump sum amount equal to the Sum Assured upon the insured’s death. The plan offers a life cover upto 75 years of age. The premiums are affordable and even lower for women.
  • Policy Terms and Conditions: Last but not the least, one must ensure that they go through the policy terms and conditions thoroughly before signing the dotted line. Doing so avoids any future confusion and gives the policyholder an acute idea of policy inclusions and exclusion, and additional charges under the plan.
Conclusion

Being unprepared for the future of one’s loved ones is a deliberately irresponsible choice and avoiding opting for a pure term insurance plan only puts the future of those loved ones in further danger, with no financial safety in the event of the death of the family’s breadwinner. This is certainly not a risk worth taking and there is no better way than a pure term insurance plan to financially protect one’s family in the policyholder’s absence.

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