The simplest and purest type of life insurance is term insurance. At the most reasonable prices, it offers your family financial safety. With term insurance, you can obtain a significant quantity of life insurance (also known as the sum assured) for a very little premium cost. If the person insured passes away within the policy’s term, the benefit amount is paid to the nominee. You can also avail of term insurance tax benefits with a term plan.
What makes term insurance necessary?
- Having enough money for your family: If you are the main breadwinner, purchasing a term plan would cover your family’s monthly expenses while you are away.
- Secure your assets: You may have taken out a loan for a vehicle, house, personal loan, or education. Your family may experience financial hardship while you are away due to the payback of these loans. Your loans are paid off with the income from your term insurance plan, which also ensures that your family won’t have to shoulder the further debt.
- Lifestyle-related risks: As you become older, your risk of contracting a lifestyle disease rises. Some term insurance policies include critical sickness coverage, which safeguards your family not only in the event of unforeseen events but also while you are still alive. The critical illness benefit offers you cash protection against a number of serious health issues, including heart attack and cancer.
Characteristics of Term Insurance
Understanding what is a term insurance and the elements that will help you better comprehend the purpose and advantages of term insurance. Among the distinguishing characteristics of term plans are the following:
- Affordability: Term insurance contracts are among the least expensive types of life insurance. Term insurance policies typically have substantially lower premiums than other types of life insurance.
- Entry age: With a minimum eligibility age of 18, you can get term insurance early in life. When you purchase a term plan when you are young, you can get a sizeable amount of coverage for a very low premium.
- Policy Term: The policy term, or length of coverage provided by term plan, is determined. If an unfortunate incident occurs during this time, your nominee will be given the amount guaranteed by your insurance policy. If you choose the whole life insurance option, term insurance tenures can begin at 5 years and last until your 99th birthday. You can choose the ideal policy term for your needs based on how long your loved ones might require your financial support.
- Benefit at maturity: Term insurance offers your family financial security in the event of an emergency. It is not intended to be used as a tool for investing. In the fortunate event that you survive the policy tenure, it, therefore, does not provide any return on the premium you paid. If you desire some maturity benefits, you can also choose term insurance with a return of premium option. With these plans, when the policy matures, you will receive a full refund of the premiums you paid over the course of the policy.
- Payment Flexibility: You can pay the term plan premiums at your convenience. You have a variety of premium payment frequencies to pick from, including yearly, semi-annual, quarterly, and monthly premiums. Such consistent premium payments are perfect for salaried people with a reliable source of income.
- Life insurance: A term plan protects your family from financial hardships in the event of an unlucky circumstance. It offers a life insurance policy of your choosing for reasonable premiums. Your loved ones will receive an assured sum if an unfortunate event occurs during the policy time, thanks to this life insurance. The payout can assist your family in maintaining the standard of living you wish for them while you are away.
- Additional add-ons: For a small fee, you can expand the scope of your base coverage by adding riders or add-on benefits to your term insurance policy. With term plans, a variety of riders are offered, including
- Critical Illness
- Accidental Death Cover
- Waiver of Premium Benefit in case of a permanent disability
- Tax advantages: Term plans provide numerous term insurance tax benefits. You may deduct up to 1.5 lakhs from the term plan premium you pay under Section 80C of the Income Tax Act of 1961. Under Section 10 (10D), the payments are also tax-exempt. A health-related add-on rider also entitles you to tax benefits under Section 80D on the premium you paid for the rider.
The tax benefits mentioned in the article may not apply if you opt for the new tax regime since many tax exemptions and deductions have been scrapped within the new regime.
A term plan provides a safety net for your family while you are away; you may secure yourself and your family while making use of all these advantages now that you have understood what is a term insurance.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.