Term insurance is one of the most popular forms of life insurance. One of the major reasons why many Indians prefer buying a term plan over other life insurance is that it has the lowest premium. Also, the working of a term life insurance policy is simple and easy to understand for all.
In term insurance, you pay a fixed premium to the insurance company, and in return, the insurer agrees to pay the death benefit, i.e., the policy’s sum assured amount to the nominee in the event of your unfortunate demise during the policy term. And, since it is a pure protection plan, if you outlive the term insurance policy period, you do not get any survival or maturity benefits.
Features and Benefits of Term Insurance
Now that you know what term insurance is, you should understand its features and benefits.
Coverage against uncertainties
If you are the breadwinner in your family, buying a term insurance policy can help you secure your loved ones’ financial future if something happens to you. Your family can use the policy benefits to cover their everyday expenses and be financially independent in your absence.
You can buy a term plan with a high life cover at a relatively smaller premium and ensure that your family never faces any financial hassles in the future.
Includes multiple payout options
Generally, most insurance companies pay the death benefit to the deceased policyholder’s family in a lump sum. But, if you think that your family or the nominee is not financially very savvy to handle a large amount, you have the flexibility to choose deferred payout.
In a different pay-out, the insurer will pay the sum assured in smaller instalments over a period. Or it could be a combination of a lump sum and deferred payment where the insurer pays a specific percent of the sum assured in a lump sum and pay the remaining amount in smaller installments.
Riders or add-ons
All term insurance policies have certain limits in terms of the coverage and the type of death covered. For example, standard term insurance may not cover death due to a critical illness like cancer or a road accident.
This is where riders or add-ons are useful. Rides or add-ons are additional coverage options that you can purchase voluntarily by paying an additional premium. The riders cover specific risks that are not covered in a standard term plan.
Apart from securing your family’s future, a term insurance policy is an excellent tax-saving instrument. The premium you pay is eligible for tax deduction under Section 80C of the Indian Income Tax Act. You can get a deduction of up to Rs. 1.5 lakhs in a financial year. Also, the payout that your family may receive is completely tax-free under Section 24 of the IT Act.
Who should buy term insurance?
Ideally, every earning individual must buy a term insurance policy to safeguard their family’s future. Even if you have sufficient savings and sound financial background, a term insurance policy will act as an additional financial cushion to your family.
Many experts recommend buying term insurance at an early age as soon as you get your first paycheque. When you are young, you can get a policy with high coverage at an affordable premium.
Secure your family’s tomorrow now!
Now that you know about the benefits of a term plan, ensure that you give your family the protection they need and purchase a policy today. But compare the plans carefully and choose the one that best suits your needs.