Reasons to Buy Term Insurance

Table of Content

1. Looking to buy a term insurance plan?

2. How a Term Life Insurance Plan works?

3. Benefits of a Term Insurance Plan

There are many types of life insurance plans that are available in the market, and each offers various benefits. A term life insurance policy is one of the most popular and affordable forms of life insurance plans. According to these insurance policies, you pay a premium for a specified period of time and if you die during that time, the nominee or your family will be paid a death benefit or sum assured. However, if you do survive during the policy term, then no payout is made.

How a Term Life Insurance Plan works?

A term life insurance plan provides financial security along with helping your family to achieve their future goals, such as higher education, a wedding ceremony, vacation, etc. It offers maximum coverage at a lower premium rate during the policy tenure. But planning based on your requirements and financial goals is extremely crucial to finally select the best plan which works for you and your family. 

For example, Rahul and Aditya are friends in their early 30s who work in the same company, draw similar salaries, and have almost the same lifestyles. While Rahul has no outstanding loans or obligations, he wants to ensure that his daughter’s education needs are met if something happens to him. While Aditya has a home loan and is newly married and he has no kids, he wants to ensure that his wife is able to pay the home loan in any unfortunate scenario. As both of them have different goals and obligations, the sum assured, the payment terms, death benefits, and length of tenure will differ for both of them.

These premiums can be paid at one time or at regular intervals based on the type of payment mode opted for by the buyer, and last either for the complete tenure policy or for a limited period of time. Your dependents may get a lump sum amount in case of your unfortunate demise; however, you may also be given an option to receive a monthly income along with the lump sum amount as the death benefit to manage regular expenses.

Benefits of a Term Insurance Plan

A term insurance plan comes with extensive benefits to meet individual needs. Here are 4 of the key reasons why you should buy a term life insurance plan:

1. Affordable premium rates -

   It is available at a comparatively lower premium rates to other life insurance policies. The premium is even lower if invested at an early age. Also, you have the flexibility to choose the payment mode and frequency at your convenience by choosing between monthly, quarterly, half-yearly, or yearly payments.

2. Tax Benefit -

   Under section 80C of the Income Tax Act of India you can get tax benefits on premiums paid.

3. Additional coverage -

   The primary benefits of term insurance plans only offer life cover; however, you can opt for a small add-on premium amount for protection against critical illness like kidney failure, heart attack, cancer, etc. You can also add a rider to your term insurance policy to provide additional term insurance benefits or cover in event of an accidental death or dismemberment.

4. Return of Premium Option -

   The term insurance plan covers death but offers no benefit on maturity. You can choose the Return of Premium option to avail maturity benefits where your total premium amount will be returned if you survive the tenure. However, you will need to pay a higher premium to avail the same. The premium amount that will be returned excludes taxes, levies, rider premium, and modal amount paid. You can use an online term plan calculator to estimate the premium of a term insurance plan with or without maturity benefits.

It is essential to buy a term insurance plan that will act as a financial safety net for your family and their goals. Remember, do not follow a one-size-fits-all approach, and always consider your financial liabilities and goals while seeking the right kind of coverage and add-ons.

You should also make sure to read your policy terms & conditions, related documents, and additional features before investing in a term insurance plan. As a thumb rule, buy a term insurance plan that is at least eight to 10 times your current annual income. For instance if your annual income today is Rs 10 lakhs then you should opt for a life cover of at least Rs 80 lakhs or more to heap maximum benefits and to make sure you are sufficiently covered.

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