A Level Term plan is a type of term insurance plan where the beneficiary receives the death benefit in case of an uncertain demise of the insured. This is known as the Level Term Plan because the premium to be paid &the death benefit to be received remain constant throughout the policy tenure.
Suggestions to Choose a Correct Level Term Plan
Mentioned are the suggestions to buy a correct level term plan:
- Look for a level-term plan that meets your financial obligations.
- Your policy could lapse if you do not pay the premium amount. Hence, consider the current financial situation before buying the policy.
- Choose the maximum policy tenure; let us say 20 20-year policy can be considered by young parents for their children’s education purposes.
- Also, consider the insurer’s track record in terms of claim settlement, payments, customer reviews, etc.
Reasons to Choose a Level-Term Insurance Plan
Provided are the reasons to choose one of the best Types of Term Insurance, i.e. Level Term Plan:
- Financial Protection
This plan provides financial protection to the family members of the insured so they can meet their financial obligations. The family members can meet routine expenses like bills, fees, loan instalments, etc., with the help of this amount.
- Constant Amount of Premium
The premium amount remains the same as that of insurance companies, which are prohibited legally from increasing the premium amount during the policy tenure. Even in case of health-related changes, the company is bound to protect the insured for the premium amount agreed upon. This plan is the most preferred one, as one can plan their expenditure well in advance according to their budget.
- Taxation benefits
The death benefits received by the nominees are exempt from tax, i.e. tax-free. Also, get a deduction of tax under sections 80C & 10(10D).
- Affordable & easy to Underst&
Choosing a term insurance plan is a tedious task, but choosing an affordable plan is not if level-term plans are opted for. These plans are quite affordable & do not impact your pocket as much.
- Enhanced Protection
Under this plan, one can also add critical riders by paying an additional premium. Examples of these riders are critical illnesses, accidental death, critical illnesses, premium waiver, disabilities due to an accident, & hospital benefits.
Factors to Be Considered While Choosing a Level-Term Insurance Plan
Provided below are the factors to be taken into consideration while opting for a level-term insurance plan:
- Length of Coverage
Analyse the tenure of coverage, i.e. 10, 20, or 30, depending on your requirements & the milestones of your life. This means you can consider the age of retirement, financial obligations, children’s education, children’s marriage, etc.
- Amount of Coverage
Determine the amount of insurance coverage depending on the future financial obligation, which may include debts, future expenses, & educational expenditures. Considering this will help meet financial obligations in the absence of a policyholder.
- Premium Cost
Compare the premium costs of different insurance companies; though you may like the policy having the lowest premium amount, make sure that it will offer sufficient coverage without any feature being compromised. Plan the amount of premium wisely as it cannot be changed afterwards & will remain constant.
- Reputation & Financial Stability of Insurance Company
Conduct proper research about the financial reputation & stability of an insurance company in terms of its service, claims settlement & payments.
- Financial Health
Check the ratings from financial rating agencies, which assess the claim settlements & financial strength of the insurance companies.
- Policy Features & Flexibility
The policy to be chosen should be well-versed with features like flexibility, conversions, etc., which means an insured can convert from one type of policy to another, considering the health changes.
- Riders & Benefits
Consider adding rider benefits to the base plan. Examples of these riders are critical illnesses, accidental death, critical illnesses, premium waiver, disabilities due to an accident, & hospital benefits.
- Ease of Application Process
Consider the ease of applying the insurance policy, i.e. how easy or difficult it is to apply the policy. For instance, some policies have few medical examination requirements or even no examinations.
- Clarity & Transparency
One should have clarity on what the policy they have opted for includes or excludes, i.e. one should be well aware of the terms & conditions of the policy. Having a better underst&ing& clarity about the policy helps meet the financial obligations in a better manner.
Positives&Negatives of Level-Term Insurance Plans
Let us first discuss the positives of Level Term Life Insurance Plans:
- Predictable Premiums
The premium amount is predictable as it remains constant, making budget planning easy.
- Clear Coverage Period
Choose the tenure that best aligns the policy coverage with your financial obligations as per your requirements.
- Simplicity
This plan is easy, straightforward, & simple to underst&.
- Affordability
It is a cost-effective& reasonable plan.
- Flexibility
Level Term Insurance provides many options at the end of the policy tenure, making the plan flexible.
Let us now discuss the negatives of Level Term Life Insurance Plans:
- Coverage Expiration
It is for a definite period as it has an end date. Hence, the benefits cannot be availed once the policy date has expired.
- No Cash Value
The level-term plan only provides death benefits as they do not involve any cash value. In a nutshell, there is no investment component included in the term plan which will reap returns.
- Renewal Costs
Once the policy tenure is over, to get the same renewed, you will be required to pay a higher premium amount.
- Fixed Coverage
It offers predictability in terms of coverage.
Conclusion
A Level Term Plan is a simple, easy-to-underst&, & straightforward way to avail of life insurance without thinking much about the unexpected costs. While considering the options, ensure the coverage you opt for meets the financial obligations, for which you can also take a financial advisor’s help to decide.