If you're looking for life insurance, but are hesitant to pay premium prices, a term policy might be a good option for you. It's cheaper, has flexible premiums, and requires minimal medical checks. A term plan gives one fixed sum at the end of the term period, in case the insured dies during that period.
For example, the plan could provide a payout of Rs 5 lakh on the death of the insured - after three or five years. While permanent plans offer the biggest benefits, they require a higher investment. However, term plans cost less and are easy to get, which is why most people choose this type of insurance.
With that said, let’s take a look at some of the most salient benefits of term life insurance that make it one of the best bets in the Indian financial market.
Affordable Coverage
Term insurance is a type of life insurance that has many different benefits. It is one of the most popular types of life insurance policies because it is so affordable. When you buy term insurance, it is available at a lower cost than other types of life insurance policies. The earlier you buy your policy, the more affordable the premium will be.
The premium that you pay will also depend on where you buy your policy. If you buy your policy online, it may be less expensive than if you went to an agent or bought it through another offline channel.
The benefit of buying online is that the cost-saving can be passed on directly to you. It is easy to check online how much term insurance costs and how it compares to other types of life insurance policies.
Straightforward in Nature
Term insurance is a pure life cover that offers financial protection to you and your family against any unforeseen circumstances. It has no investment component in it.
The insurer covers your life for a fixed duration, and the nominee of the policy gets the death benefit under the plan, provided the death occurs before the maturity date.
The features of term insurance plans make them affordable yet effective in offering life protection. Term insurance benefits can be explained clearly with the help of an example. Imagine a salaried individual paying Rs. 1 lakh as an annual premium for a term plan offering coverage amount of Rs.2 crore for 30 years.
If he dies within this 30-year term, his nominee will get Rs. 2 crores from the insurer and settle all his financial liabilities without any difficulty. If he survives for 30 years, there will be no payouts and returns from the insurer, as it is only a pure life cover with no investment component in it.
Multiple Payouts
In case of your demise, your family may have to repay various debts. These could include any EMIs you are paying for a home loan, car loan, or personal loan. In such a situation, the payout options of term life insurance plans can help your family pay off these loans.
Term life insurance plans have some payout options that give your family the freedom to choose the type of benefit they want after you pass away. Your family can choose to get a lump sum amount as the death benefit. This lump sum amount can be used to pay off the aforementioned loans.
If your family would prefer a monthly income over a lump sum amount, some term plans also offer monthly income as an option along with the lump sum amount as the death benefit. With this monthly income, your family may find it easier to manage their regular expenses without worrying about financial stability.
Rider Availability
When you buy a term insurance plan, you are protected for a fixed period. However, there might be instances when you may not be able to pay your premiums for the policy and it will lapse. This means that if something were to happen to you during this time, your family would not be able to claim the death benefit.
To avoid such situations, many insurers offer additional benefits that customers can choose to enhance the basic term insurance benefits. These additional benefits are called riders and they come with an additional premium.
By paying a nominal additional premium, you can add these riders to your existing term insurance plan which can help safeguard your loved ones even when you are not around.
Tax Benefits
The premium paid for a term insurance plan is tax-deductible under Section 80C of the Income Tax Act. This means that you can claim a deduction of up to INR 1,50,000 each year on the premiums paid towards the policy, thereby lowering your tax burden.
The death benefit received by the nominee is also completely tax-free under Section 10(10D) of the Income Tax Act. So, in case of an unfortunate event, your family and loved ones will be able to receive the entire payouts without worrying about any tax liability on it.
Return of Premiums
Life insurance is all about securing your family and loved ones in the event of your untimely demise. While a pure term insurance plan only provides life cover to the beneficiary, you can get maturity benefit under a term insurance plan if you opt for the return of premium option.
This option will require you to pay higher premiums but will return you the total premiums paid by you if you survive the policy tenure.
This is a great option for anybody who doesn’t need long-term life insurance. It offers much cheaper premiums than whole life insurance, while still giving you a sense of security and protection. You aren’t locked in like you are with permanent plans.
Term insurance comes with a set number of months or years, and at that time you could either drop it or roll it over into another term plan if you want to continue the coverage. This flexibility is one of the main advantages of term insurance.
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