Life is an exciting journey full of ups and downs. It is also essential to safeguard your loved ones’ future against any uncertain events. Term life insurance can be a valuable financial tool that protects your family financially and gives you peace of mind.
In this blog, we will talk about term insurance policies and their benefits. Learn about term life insurance for better financial decisions. Let’s dive into the pool of the Insurance world and understand Term Life Insurance Policies.
What is Term Insurance?
A term insurance policy is a life insurance plan that provides death coverage to the policyholders for a specific time limit. It is the simplest form of life insurance that protects your family financially at an affordable premium. The sum assured is paid to the nominee in one lump sum if the policyholder dies during the policy term.
But it is important to note that a term life insurance policy does not provide maturity benefits like money back or market-linked life insurance policies do. Still, the policyholder can get higher coverage at an affordable rate.
Benefits of Having a Term Life Insurance Policy
#1. Simplicity
A term insurance policy can be understood easily, so it is gaining popularity amongst young adults. It provides life cover and offers your dependents the sum assured in case of unfortunate events. You have to make sure to pay the premium on time.
#2. Affordability
One of the top advantages of term policies is their affordability. For example, the premium can be as low as INR 500 per month for a life cover of up to INR 1 Crore.
#3. Tax Benefits
Besides providing financial assistance to your family, term life insurance also provides you with tax benefits. They are:
Section 80C: Under Section 80C of the Income Tax Act 1961, a deduction of up to INR 1.5 lakhs is available for investments including life insurance premiums.
Section 80D: Under Section 80D of the Income Tax Act 1961, you can claim a deduction of up to INR 25,000 for the premiums paid for health-related coverage, such as critical illness riders.
Under Section 10D: Under Section 10D of the Income Tax Act 1961, you can claim this benefit while claiming the payout and the entire amount is exempted from taxes.
#4. Age of Entry
Term insurance policy allows individuals to get term plans starting from 18 years of age. In this way, you can get insured early in life, and buying a term plan at a young age allows you to get higher coverage at an affordable premium. This is one of the most important term insurance benefits.
How Does Term Insurance Work?
By understanding the working of term insurance, you can better understand what term insurance is. Some of the basic steps involved in the working of term insurance are:
- An individual purchases a term insurance policy that suits his preferences, such as coverage, amount assured and term of the policy.
- The policyholder pays a fixed premium for the duration of the policy term. In addition, if the policyholder passes away during the policy, the nominees get a death benefit payout after claiming it.
- If approved, the insurance company verifies the claim and pays out the death benefits to the nominee.
- If the insured breaches the policy term, the coverage ends, and the life assured does not get any payout.
Things to Consider When Buying a Term Insurance Plan
#1. Calculate Coverage
The term insurance coverage should typically assess your family’s financial needs if you have an unforeseen death. Hence you should know your monthly expenses, liability, long-term financial goals and responsibilities to buy the right term insurance policy.
#2. Assess Tenure
Once you know how much coverage you need, you must know what age you will need it. Ideally, you should avoid very short tenure to ensure your financial goals are met, and the tenure should not be too long, as it may attract higher premiums.
#3. Select Add-Ons
Add- ons can strengthen your term insurance plan, but they should be selected wisely as add-ons increase premiums (though at affordable rates). Therefore, it is essential to take add-ons carefully. Add-ons include additional cover for death due to accident, critical illness, waiver of premium on disability, waiver of premium on critical illness etc.
#4. Check the Claim Settlement Ratio
It refers to the efficiency at which the insurance companies settle the policies. For example, a claim settlement ratio of 95 means that 95 out of 100 claims were settled. The insurance company is more trustworthy when its claim settlement ratio is higher.
Final Thoughts
A term life insurance policy offers several benefits that can impact your financial health positively and gives you peace of mind. As it provides financial assistance in case of the policyholder’s death and provides flexibility in coverage, and is an affordable option, term life insurance is an intelligent financial tool to safeguard your loved ones. Buy a policy today and protect your future instantly!
