5 Reasons Why You Should Not Underrate Term Insurance

Understanding term insurance

As the name suggests, term insurance plans offer coverage for a fixed term. In case of your demise during the term of the policy, your beneficiary is entitled to receive the sum assured as per the provisions of the insurance plan. This amount provides financial security to your loved ones and helps them meet their financial obligations even in your absence.

The entire premium amount is allocated towards providing insurance coverage. Hence, in case of survival upon maturity, no survival or maturity benefits are provided. Many individuals, therefore, underrate term plans and chose not to purchase such a type of life insurance policy. However, term plans offer insurance coverage along with a plethora of other benefits.

Following are five major advantages of term insurance policies.

1. Coverage against uncertainties

Life is uncertain. The risk of an untimely death cannot be ruled out. In order to cover the financial losses arising out of such a risk, it is recommended to invest in a term insurance policy. Your insurance provider will pay the sum assured to your family members, thus providing a high degree of financial security when you are no longer around.

2. Benefit of additional riders

You may enjoy the benefit of comprehensive coverage by opting for riders with your existing term insurance plan. Though riders come at an additional cost, they provide a higher level of protection. Many insurance providers offer add-ons covering accidents or critical illnesses such as end-stage liver disease, benign brain tumor, permanent paralysis of the limbs, and major surgery of aorta, among others.

3. Income replacement

In case you are the breadwinner of the family, your loved ones will be financially impaired and would find it difficult to make ends meet in case of your absence. The death benefit provided in a term insurance plan, therefore, acts as an income replacement.

4. Lower premiums

One of the major advantages of a term insurance plan is affordability. Such plans come with a low premium along with a high level of insurance cover. This is because term insurance is a pure risk plan with no returns. You may also consider buying a term plan through the Internet. Purchasing such a policy through the insurer's website will help you benefit from lower premiums as the cost of paperwork and commission is eliminated.

5. Tax benefits

Another reason not to underestimate a term plan is the tax benefits it has to offer. Premiums paid towards term plans are eligible for tax deductions up to INR 1.5 lakh under Section 80C of the Income Tax Act, 1961. You may also avail of tax benefits on the death benefit amount under Section 10(10D) of the Income Tax Act, 1961.

A term insurance plan, therefore, cannot be underrated as it offers a lot of benefits. It is the minimum level of protection required to provide financial security to your loved ones in case of your sudden demise. You may, therefore, invest in a term plan and enjoy peace of mind knowing that your dependents will be taken care of when you are not around.