What Is Term Insurance?

Term insurance is one of the most affordable form of life insurance. With a term plan, you can provide financial security to your loved ones/nominee(s) by ensuring a death benefit payout in case of your unfortunate death. However, in exchange for this life cover, you must pay premiums to the life insurance provider.

A term plan's life insurance coverage is active for a set period, that is determined at the time of purchasing the plan. This is known as the Policy Term. For example, it can be 10, 20, or 30 years. Furthermore, some term insurance plans may even provide life insurance coverage up to 100 years of age. A term policy is also called a pure life insurance policy, meaning, it does not include any investment/savings component.

Therefore, in the case of a standard term plan, if you live past the policy term, you will not receive any returns/maturity benefits. However, if you pass away while the policy is still in effect, the insurer will pay out the assured sum to your nominees. The nominees can then utilize this sum for numerous purposes, like settling any outstanding debts, covering routine expenditures, and funding their life goals.

Why Do You Need Term Insurance?

Imagine this: In your four-person family, you are the sole breadwinner. You make Rs. 50,000 a month, and your partner and two kids depend on your income to cover their cost of living, home maintenance bills, and other expenses. Right now, your income is enough to cover all these expenses. You have around 30 years of service left, and by then, you hope both of your children will have completed their schooling and achieved financial independence.

But a tragic accident result in your passing, leaving your spouse and children without financial security. In this case, your spouse would need to start working, or if your kids are old enough, they might have to give up their aspirations of going to college and start working for the family instead.

Term insurance makes sure that even in your absence, your loved ones won't have to give up on their aspirations in life. Here are a few benefits of buying term insurance:

Benefits of Term Insurance

● Protecting Your Family's Financial Future

As discussed in the above example, if you make any financial contributions towards your household, whether wholly or partly, your family members will rely on your income to cover their daily expenses and reach their goals in life. Your loved ones won't have any backup money in case something unfortunate happens to you.

A term plan can guarantee that your family won't be left without financial security in your absence. Your loved ones can continue to pursue their life goals and take care of their everyday needs with the assistance of the payouts made under the insurance policy.

● High Life Cover At Affordable Prices

The affordability of term life insurance is one of its most distinguishing qualities. Term plans can only pay out death benefits since they are a pure life insurance product. Because of this, insurers can set reasonable premiums. Furthermore, by acquiring your policy early in life, you can further reduce the cost of your term plan.

● Options For Flexible Premium Payment

Term plans include a variety of premium payment options. By selecting a single premium plan, you pay your premium in a single lump sum. Alternatively, by selecting limited or regular premium plans, you can pay your premiums at regular intervals (on a monthly, quarterly, semi-annual, or annual frequency).

With limited premium paying term, you must pay premiums under limited premium plans for a period shorter than the policy term. However, with regular premium plans, you are required to pay your premiums for the entire policy duration. You are free to select whichever option suits your needs.

● Tax Advantages

Additionally, term insurance provides tax advantages in the form of tax exemptions and deductions. You are eligible to deduct up to Rs. 1.5 lakhs of the yearly premiums paid towards your term plan from your gross income u/s 80(C) of the Income Tax Act, 1961. This lowers your taxable income and, therefore, the tax liability. Additionally, the death benefits that your nominee receives under the plan are tax-free u/s 10(10D) of the Income Tax Act, 1961.

● Enhanced Coverage With Add-On Riders

By itself, term insurance covers your life against accidental or natural death. However, you can rely on add-on riders to enhance your insurance plan's coverage. These add-ons provide financial protection for specific needs and expenses.

For instance, the accidental permanent partial/total disability rider provides a lump sum payment if you sustain a partial or total permanent disability due to an accident. Another option is a critical illness rider, which provides financial protection against several severe illnesses as specified by the rider.
 

How To ChooseTerm Plans are an affordable life insurance that provides financial security to your family in your absence. Read on to know more about what is term insurance. the Right Term Plan?

You must consider the following factors while selecting the best term insurance plan for your requirements.

● Cover Amount
The cover amount you require is the first thing that you must decide. Unfortunately, there isn't a single solution to this. To determine the precise amount of life insurance you need, you must make sure it is sufficient to pay for your family's daily expenses, the cost of their aspirations, and any outstanding debts in your name.

● Policy Term
Choosing the right term insurance plan for you also involves determining the correct duration of coverage. As a rule of thumb, the policy term should be long enough to cover you during your earning years, as well as cover your life goals and your debt. This will provide complete financial security for your family.

● Premiums
You should choose a term plan that you can afford. You might find it challenging to pay the premiums if you select a term plan that is out of budget for you. This can then result in the policy lapsing. Consequently, you will lose all advantages provided by your term plan at that point.

● Riders
You can add riders to your basic life cover for a small additional fee. Choose the ones that are relevant for you and get enhanced coverage. For example, choosing an Accidental Total and Permanent Disability Rider can aid you in the form of a lump sum amount, so you can manage your expenses. It comes into effect after 180 days of your condition being presented.

● The Claim Settlement Ratio
The ideal term life insurance policies should provide trustworthy financial security for your nominees. You must pick an insurer with a high claim settlement ratio if you want to be sure of this. This ratio shows the number of claims that an insurer has settled in relation to the total number of claims received within a specific financial year. The greater this percentage, the more probable it is that your nominee's claim will be settled.

 

Conclusion

One of the most affordable methods of securing the future of your loved ones is with a term plan. The ease, financial stability, and peace of mind that term insurance provides are simply unmatched. Since nobody can predict what tomorrow will bring, planning should begin today. Secure your family’s future with affordable term plans today!