BENEFITS OF TERM LIFE INSURANCE PLAN - KNOW ABOUT OF TERM PLAN

Term insurance plans are typically affordable insurance plans that provide full protection and financial stability to your loved ones in case of any unforeseen events.

A Term insurance plan is a life insurance plan offered by an insurance company that provides comprehensive financial coverage against the premium paid for a limited period to the beneficiary of the policy.

The term insurance plan mainly provides coverage of death benefits on dismissing insured during the policy term. 

What is the Term Life Insurance Plan?

Term insurance is a type of life insurance that provides coverage for a specific period of years. This type of life insurance provides financial protection to the nominee in case the policyholder dies during the policy term. Term Insurance policies provide high life cover at lower premiums. For e.g.: The premium for ₹ 1 Cr Term Insurance cover could be as low as ₹ 490 p.m. These fixed premiums can be paid at once or at regular intervals for the entire policy term or for a limited period. Premium amount varies basis the type of premium payment method opted by the buyer.

Why do you need Term Insurance?

• Your family depends on you: The term

insurance money can be used to meet your family’s monthly expenses and important goals like your child’s education.

Your assets need protection: You may take loans for assets like a house or a car. However, if something happens to you, your loved ones might be burdened with loan repayments. In such a situation, the term insurance payout which your family will receive can be utilized in paying off outstanding loans.

Lifestyle risks: Modern-day lifestyle problems can lead to a host of ailments. Some term insurance plans don’t just protect your family after death but also during your lifetime by offering critical illness protection. This feature pays out on the diagnosis of certain critical ailments like cancer or heart attack.

Who should buy a Term Insurance Policy?

Life Insurance premiums paid are deductible from taxable income under Section 80C and hence carry a double benefit for taxpayers – protection and tax-saving. The payment (maturity value) received under an insurance policy is also exempt subject to conditions under Section 10(10D) of the Income Tax Act, 1961. Term insurance also has among the lowest premiums among the different types of insurance policies.

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• Parents are generally the sole source of financial support for their children. This policy will pay out a lump sum and/or income to satisfy their children’s expenses, in the event of the death of the parent(s).
• Newly-married: Term insurance plan assures the spouse of financial support in case the insured person passes away and should be purchased as soon as possible by married couples.
• Working Women: A term insurance plan assures that your parents/spouse/children are financially secured even in your absence. The term insurance policy coverage amount also helps to take care of any outstanding liabilities like home loan, auto loan, education loan, etc. Not only this, but some term insurance plans also come with the added benefit of a critical illness cover that provides a payout in case you are diagnosed with a serious illness like breast or cervical cancer.
• Young Professionals: Such individuals should buy term insurance plans now rather than wait. This is because once a policy is purchased, the premiums stay the same throughout an individual’s life. On the other hand, waiting to buy Term insurance in the future can force customers to pay higher premiums because in term insurance plan premiums rise with age.
• Taxpayers: Term insurance premiums paid are allowed as a deduction from taxable income under Section 80C of the Income Tax Act, 1961. The term insurance payouts on maturity are also exempt from tax subject to conditions under Section 10(10D). Hence taxpayers can use term insurance to significantly reduce their tax burden.
• SIP Investors: Investors in mutual fund SIPs (Systematic Investment Plan ) invest a fixed amount every month in a mutual fund. Term Insurance can protect the SIP by providing the nominees of the insured person with funds to continue the SIP.
• Retirees:  Buying term life insurance can also be a way of leaving an inheritance for their families. This is because term insurance is paid out to nominees on the death of the insured person

An additional benefit you can get with Term Insurance Plan?

While buying a Term Plan type of life insurance plan, we always have questions like which Term Plan is the best term insurance plan and how to compare the other Term Life Insurance Plan. Here are some parameters of benefits which may help you choose the Best Term Plan for yourself:

• Claim Settlement Ratio: This ratio tells you how many claims for life insurance have been paid out as a proportion of claims made. The higher this ratio is, the better.

• Solvency Ratio: Solvency ratio tells you whether the insurer you choose will be financially capable of settling your claim if the need arises. IRDAI mandates that every life insurer should maintain a solvency ratio of at least 1.5.

• Option to add Critical Illness Benefit: Critical illness like cancer or brain surgery can cost a lot of money and cripple the family’s finances. Critical illness protects your family from this risk. It pays out immediately on diagnosis and only medical documents confirming diagnosis are to be submitted.

• Option to add Accidental Death Benefit:  If you have opted for Accidental Death cover, your family will get an additional payout in case of death due to an accident, subject to a maximum of 2 crores. 
• Waiver of Premium on Terminal Illness: In case the person covered by the policy gets affected by terminal illness, his/her future premiums will not need to be paid.

How long should be the term of your Term Plan?

The tenure of your term plan is as important as the amount of premium you pay. The longer, term insurance plan, the greater will be the policy’s annual premium. If you keep the period too short, there are chances that you would be without a cover in a period when your loved ones will still need financial protection. Therefore, it makes sense to consider important factors like the tenure of your term plan when you are buying a term plan in India.

The conclusion should you Purchase Term insurance Plan or not?

When it comes to buying pure term life insurance plans, do not merely go by the premium amount. Go for the insurer with whom you are comfortable and pick a policy that suits your insurance requirements. "Buying a term plan online is a wise decision". 

However, you should keep certain things in mind such as the amount of coverage required, liabilities, life stages, income, and future expenses, etc. Also, make sure that you select policies from reputed insurers, and check the company's claim ratio, add-on covers, additional riders, and service standards before finalizing your purchase," says Naval Goel, Founder, and CEO, Policyx.com. Remember, buying an insurance policy is a long-term commitment. So, you should get adequate cover only after doing due diligence. (Source - The Economic Times)

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