You work hard to ensure your family’s financial security. Unfortunately, life is full of uncertainties, and you never know when an unforeseen circumstance wreaks havoc in your family.
It is important to avail of life insurance coverage to make sure that your loved ones do not go through financial distress during your absence.A simple pure life cover that you can consider is a term insurance plan.
Before discussing the benefits of these plans, here is an explanation of what is term insurance:
Understanding term insurance
A term plan offers life cover for a specified period. In case of any untoward incident during the policy duration, your beneficiaries receive the sum assured.A term life policy is an affordable way to secure your family’s financial stability in your absence. Unlike regular life covers like endowment and money-back policies, a standard term plan does not pay maturity benefits.
Seven advantages of term insurance plans
- Economical premium
The entire premium that you pay in case of a term is for life coverage, and it does not offer any investment component. Therefore, the cost of a term plan is lower when compared to other types of life insurance policies. A term policy is one of the most cost-effective ways to procure high coverage at a reasonable premium. You can use an online term insurance calculator to determine the amount according to your current life stage and other factors like age, habits, and income.
- Financial stability
If you are the only earning member in the family, your absence may leave your loved ones in a financial mess. Without adequate life cover, they may find it difficult to meet regular household expenses. When you buy a term insurance cover, you ensure that your dear ones do not face financial challenges. They receive a pre-decided amount in case of an unfortunate event. They can use these funds to meet daily expenses, pay debts, or for the education expenses of your children.
- No additional charges
When you opt for an online term plan, you do not have to pay any brokerage. In most cases, the brokerage accounts for about 5% to 6% of the premium, which decreases over the policy tenure.
While most term plans pay policy benefits as a lump sum, you may choose from additional options. Some insurers pay a portion of the benefits as a lump sum and the balance as regular periodic payments that allow your family members to meet day-to-day costs. Another alternative is a term plan with return of premium (TROP) wherein you receive the entire premium that you pay during the policy duration in case of survival. However, the premium on this kind of term insurance is higher than the regular plan that offers only death benefits.
- Additional riders
To procure more comprehensive coverage, you may include extra add-ons to your base plan. Some available riders include critical illness, accidental death, disability rider, and waiver of premium. Contrary to belief, you can add these riders at a nominal extra charge to avail of more coverage.
- Income tax benefits
The premium that you pay on a term plan is eligible for a tax deduction of up to INR 1.5 lakh under Section 80C of the Income Tax (IT) Act, 1961. This reduces your tax liability and helps save money. Additionally, the financial benefits that your family receivesare not taxable under section 10(10D) of the IT Act.
- Lower possibility of claim rejection
Generally, if the insurance policy is active for 10 years or longer, the possibility of rejection is lower. However, you must provide accurate and relevant information related to aspects like health conditions, lifestyle habits, and income at the time of purchase. This ensures your family does not face issues while filing a claim in your absence.
Now, you can purchase term insurance online, which makes the process convenient. So, without any further delay, invest in a suitable policy today.