Financial PlanTerm Plan

Reasons Why You Must Have a Term Plan

Term plan

Buying life insurance is essential if your family members are financially dependent on you. A term plan is among the simplest forms of life insurance, which lets you secure the financial future of your family without straining your budget. As the name suggests, a term insurance plan is valid only for a pre-determined period of time. A term insurance does not give out any benefits if the insured survives the policy term. However, an individual can always opt for a renewal. Besides the obvious benefit of financial security, here are a few reasons why you must have a term plan: –

Cheaper Premiums

Since term insurance policies are devoid of the investment element, the premiums are quite lower than other types of life insurance policies. While the premiums are low, the sum assured is very high. For instance, you can buy a term insurance policy of Rs 1 crore, just by paying a premium of Rs 7000-8000 per annum.


One of the main advantages of buying a term insurance plan is flexibility. You are free to select any offline or online plans for which health plans are not compulsory. Moreover, the plans can be customized whenever required as per your needs.

Lower Claim Rejection Rate

As compared to other life insurance plans, term plans have lower claim rejection rate. However, you must disclose all facts related to your health, finances and lifestyle accurately. The Insurance Regulatory and Development Authority (IRDA) has recently released a mandate wherein an insurance company cannot claim non-disclosure of facts if the policy has been in force for two years.

Low Brokerage Charges

Brokerage fees are a recurring expenditure which is mentioned under the premium allocation charges. This is a recurring expenditure because, each time you make the premium payment, a certain percentage is deducted as brokerage charges. However, this charge reduces gradually over a period of time. Generally, brokerage charge for term insurance plans is about 5-6 % which is lower than other types of life insurance plans. However, if you buy the plan online, you won’t have to pay brokerage charges.

Choice of Riders

Riders are additional covers which can be used to augment the benefits of your existing term insurance policy. Term insurance riders can be bought at a nominal fee. Some of the most beneficial riders include accidental death, critical illness, partial or permanent disability etc.

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

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