Ever wondered whether there is any merit in customising term insurance plans? Most experts would emphatically say yes to this question, and with good reason. This is because term insurance is not a one-size-fits-all proposition. It has to be tailored to match your unique needs. Here are some of the ways in which you can personalise your term plans.
Customization Choices Worth Noting
If you’re looking to customise your term insurance plan, here are some ways to go about it.
Premium Payments—Most term plans offer numerous premium payment modes (yearly, half-yearly, quarterly, or monthly). Choose as you please, but note that the frequency of payments is usually fixed once the policy is issued, and changing it later may not always be allowed.
Sum Assured Payouts – These payouts can also be customised in advance, depending on what you think is best for your family in the future. Your nominee can get the sum assured as a lump sum or even in monthly instalments. You can also select a combination of both these payout types in prefixed proportions.
Premium Pay Models – While premiums are typically paid each year for the policy term, alternative payment options exist. For example, Limited Pay is a model where you can pay larger instalments over a shorter period while getting coverage for the full term. This option may be useful if you anticipate fluctuations in income or want to finish your financial obligations before retirement. Though Limited Pay involves higher annual premiums, it can save money in the long run when adjusted for inflation and the time value of money.
Return of Premium – Some term plans come with a return of premium feature, which you can opt for. In this system, you will get back the base premiums paid (excluding taxes and rider charges) if you survive the policy period. This feature can be useful as a way to secure a future payout for varying financial needs. However, it’s essential to weigh this option against a pure-term plan, which might offer higher coverage at a lower cost.
Increasing/Decreasing Sum Assured – Certain term plans allow you to increase the sum assured periodically, depending on your specific needs. This option enables you to tailor your coverage as your responsibilities grow. While decreasing sum assured options are less common, some plans do offer this feature in certain cases, which can be suitable if your financial liabilities decrease over time.
Riders – You can personalise your term plan by adding useful riders to it. These enhance your coverage for specific scenarios. Common riders include critical/terminal illness, waiver of premium, accidental death benefit, and partial/permanent disability. Each rider has its purpose, and while they may increase your premiums, they can provide additional financial security for your family in various situations.
These are some of the things to keep in mind while customising term insurance plans. Doing so gives you more control over coverage, premiums, payout options, and more. Tailoring your policy based on your specific needs is likely to pay off in the long run.
