Term insurance is a simple and affordable form of life insurance that covers you for a specific period of time. A term plan works in a simple way, in the sense that your family gets the life cover payout if you pass away during the policy period. Buying a term insurance policy is a great way to secure the financial future of your loved ones. Let’s explore the key benefits of term insurance.
Key Benefits of Term Insurance
1. Affordable: Term insurance offers a large life cover at a generally low price. There are various premium payment terms. The premiums can be paid either as a lump sum payment for up to a certain number of years or till the policy lasts.
2. Financial protection: It gives you the peace of mind knowing that your family is financially protected in case you pass away unexpectedly. You can use this term insurance calculator to accurately determine the life coverage needed to keep your family financially protected.
3. Income replacement: A term plan seeks to replace your income when you are no longer around, thus helping your family maintain their standard of living. Further, when it comes to the life cover payout option, you can choose the monthly income option, which will give the term insurance payout as a monthly income to your family.
4. Tax benefits: You can get tax benefits for the premiums you pay for your term plan under sections 80C and 80D (only if you have health-related riders) of the Income Tax Act, 1961. In Section 80C, you can get deductions for premiums paid for your term plan, up to Rs. 1.5 lakhs. In Section 80D, if you have a health-based rider (such as the critical illness rider), you can get deductions for the premiums you pay for it, up to Rs. 25,000 (if you’re not a senior citizen) and Rs. 50,000 if you are 60 years old and above. Further, the life cover payout to your family is tax exempt under Section 10(10D) of the Income Tax Act, 1961.
5. Payout options: You can choose how your family receives the life cover, for example, as a lumpsum (if they are okay managing a huge amount of money) or monthly installments (if they prefer monthly income), etc.
6. Riders: You can increase the coverage of your term plan through add-ons called riders. For example, by adding the critical illness rider, you will get a payout that can help you in replacing your income and paying for your treatment expenses if you get diagnosed with a critical illness (such as cancer).
Why You Should Purchase Term Insurance Early in Life
Knowing when to buy term insurance is crucial to maximise its benefits. It's best to purchase a term plan while you're young to take full advantage. Here are the advantages:
1. Lower Premium: Buying a term plan early can help you lock in cheaper premiums, as you are likely to be healthier, which means lesser risk for the insurer, and this may translate to cheaper premiums for you.
2. Higher chances of application acceptance: When you are young, you are likely to be healthier, and the risk associated with you is likely to be lesser than someone older than you. Hence, the chances of application rejection are lower.
3. Smoother medical process: As you are young and likely healthier, the chances of needing to undergo additional term insurance medical tests are lower.
4. Greater coverage: Another big advantage of buying term insurance early is that you can get covered for a longer period of time. For example, if your retirement age is 60, by buying a term plan at 30, you can get covered for 30 years, whereas by buying a term plan at 40, you will get covered for 20 years.
Why choose term insurance plans?
An important component of financial planning is protecting your family financially. While you are earning, your family members may be able to achieve their life goals (such as education, home buying, etc.). When you pass away suddenly, their goals may get derailed, and they may be under tough financial circumstances.
A term plan payout can help them overcome financial difficulties (such as loan repayment or maintaining their current lifestyle) that may arise when you pass away.
So, if you are looking to secure the financial future of your family in an affordable way, consider getting a term plan.
Choosing the Right Term Insurance Plan is Crucial
There is no one-size-fits-all approach when it comes to choosing term plans. You should identify your needs and get clarity on important term plan decisions (such as policy duration, life cover, etc.) before you buy a term plan. Let’s delve into these important decisions:
1. Policy period: Ideally, you should cover yourself till the time you retire, as by that time you’re likely to clear most of your financial liabilities, and your family could become financially independent as well. Covering for a lesser amount of time can mean inadequate protection for your family.
2. Life cover: The life cover you choose should be such that it should be enough for your family and act as an income replacement when you pass away suddenly.
3. Riders: Term insurance plans come with interesting and useful add-ons called riders that enhance the coverage of the plans. Riders are optional and you should add those riders that you feel are necessary for you.
4. Premium payment term and frequency: Premium payment term refers to how long you’ll be paying your premiums, and premium payment frequency refers to how frequently you’ll be paying your premiums. Choose the options that you’re comfortable sustaining.
5. Payout options: This simply refers to how your family gets the life cover amount when you pass away during the policy duration. Choose the option that’s most suitable for them.
The KlarifyLife Term Guide can help you get clarity on these important term plan decisions quickly. You can check it out.
Tax Disclaimer: Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions and tax Laws are subject to change from time to time. You are requested to seek tax advice from Chartered Accountant or personal tax advisor with respect to personal tax liabilities under the Income-Tax law
Frequently Asked Questions
Q1. What is covered in term insurance?
Term insurance generally covers all types of deaths except:
1. Deaths caused by events mentioned as exclusions.
2. Suicide (it is covered 2nd year onwards in your policy duration).
Q2. Why is a term plan important?
A term plan essentially helps to protect the financial future of your loved ones. If you pass away unexpectedly, your financially dependent family members may have to face tough circumstances, such as repaying a home loan or maintaining their existing lifestyle. A term plan payout can help them in overcoming such tough situations.
Q3. What are the benefits of term insurance?
While term insurance offers a lot of benefits, like tax benefits* and riders, the biggest benefit it offers is that it helps in protecting the financial future of your family in an affordable way. You can get the peace of mind knowing that your family is financially protected in case you pass away unexpectedly.
*Tax Disclaimer: Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions and tax Laws are subject to change from time to time. You are requested to seek tax advice from Chartered Accountant or personal tax advisor with respect to personal tax liabilities under the Income-Tax law
Q4. Does term insurance have maturity benefits?
No, term insurance doesn’t offer any maturity benefits. Your family gets the life cover only if you pass away during the policy duration.
Q5. What is the best age to buy term insurance?
The best time to buy a term plan is when you are young, as you can lock in cheaper premiums. Further, the chances of your term plan application rejection will be lower as you are likely to be healthier when you are young.
Back
Share
1800-268-0890
