We all know about the benefits and importance of term plans. Ever wondered why they are the most affordable of the lot? Well, several reasons behind it will be listed below for your perusal. However, it should be first mentioned that a term insurance plan is crucial for many, ensuring adequate financial coverage for your life. This will ensure that your near and dear ones can meet costs and take care of things more effectively even when you are not around due to an untimely mishap. That being said, another reason to opt for a term plan is the affordable premium in comparison to many other life insurance plans (for comparatively higher coverage amounts). Why is this so? Let’s get to it in slightly more detail below.
Term Plan Premiums- Why Are They the Most Reasonable on the Pocket?
Several factors go into the calculation of the term plan premium. These plans essentially come with what we know as pure risk coverage for a particular duration. If you pass away within the policy’s tenure, then a fixed sum will be assured to your nominees. However, surviving the tenure means that you will not receive any such benefits. Yet, you have to maintain your policy by paying the insurer premiums regularly.
Other life insurance policies have maturity benefits as features for policyholders or even returns from investments. As a result, term plans are generally more reasonable on the pocket for buyers. You should thus venture to buy the same at an early stage and young age. This will help you enjoy the benefits of higher coverage for a low premium amount (which will stay fixed throughout the entire policy duration). The absence of any investment or savings element is what contributes towards lowering the premium for term insurance policies.
Other Reasons Worth Noting
There are some additional reasons why term plan premiums are more affordably priced compared to other life insurance plans. For starters, these plans offer coverage for a pre-fixed duration, which is called the term or tenure of the policy. Shorter durations can sometimes lead to lower premium amounts, while higher amounts are often seen in the case of longer durations.
Term insurance is also simpler to understand with various add-ons and other riders that you can opt for (by paying an extra premium) to widen the coverage scope. There are minimal bifurcations that otherwise lead to higher premiums in other life insurance policies. The amount you pay to the insurer is used to give you life coverage directly while meeting diverse fees and costs. Generally, there are no policy administration or fund management costs that you have to pay in this case, too.
Concluding Notes
It can thus be said that a term plan is the most affordable addition to any portfolio, while maintaining high coverage and guaranteeing mental peace for the future. You should compare multiple plans across insurers and take the time to understand policy features, exclusions, and riders before finalising your decision immediately.
