You might already be aware that term insurance enables you to protect your family's finances in the event of your passing. One of the most significant categories of life insurance that a person should purchase today is term insurance.
Term insurance offers tax advantages and gives your family financial security in the worst-case scenarios. In addition to this, term plans offer several other advantages.
In this blog, we will examine the definition of Term Life Insurance along with the most prominent benefits of Term Life Insurance Plans. Continue reading to learn more!
Term Life Insurance is a type of life insurance that provides the policyholder with temporary financial protection. The company pays the beneficiary the death benefit if the insured person passes away during the term of the policy.
Before purchasing Term Life Insurance, one should be aware of the key benefits and reasons to choose it.
A Term Insurance Plan offers much higher coverage for a smaller premium than conventional, money-back, or market-linked life insurance policies but does not offer maturity benefits. The goal of purchasing life insurance is to give the policyholder life protection and financial stability for his family.
A person may purchase Term Life Insurance in one of two ways:
The following is a list of some of the essential characteristics and advantages of Term Insurance Plans that make Term Plans essential:
A straightforward type of Life Insurance is a Term Insurance policy. The low price of term insurance is one of its main advantages. A Term Insurance Plan is offered at a premium that is more affordable than other types of life insurance. Another significant benefit is that the premium for term insurance will be lower the earlier you purchase it.
Additionally, purchasing term insurance digitally may result in lower premiums than doing so offline. In other words, one of the advantages of a Term Insurance Plan is that the cost savings that occur at the insurer's end are transferred to you. Even better, you can quickly check the benefits of term insurance online.
You might be repaying the EMIs on a Personal Loan you have taken out, a new car, or your new home. Your family members might be responsible for your financial obligations while you are away. It is here that the various Term Insurance Policy payout options are extremely important.
In the unfortunate event of your passing, your dependents may receive a lump sum that will assist them in managing the aforementioned financial obligations. Some Term Insurance Plans also give you the choice of receiving a monthly payment in addition to the lump sum death benefit. Your family might find it simpler to handle the regular expenses with this monthly income.
While protecting the future of your family is the main motivation behind buying Term Insurance, you can also save money on taxes by doing so. In the situation of Term Life Insurance, this benefit may be claimed at the same time as the payout, according to Section 10 (10D). Taxes are not due on any of the money at all.
Let us examine its 3 tax advantages for term life insurance:
- Section 80C: This section allows you to deduct certain investments and purchases up to ₹1.5, which includes the premium you pay for a term life insurance policy.
- Section 80D: This exemption is permitted for the cost of health-related Insurance Premiums, such as critical illness riders. For the premium you paid toward it, you may deduct up to ₹25,000.
- Section 10 (10D): If you have Term Life Insurance, you can claim this benefit at the same time you receive your payout. Taxes are not payable on any portion of the total amount.
You might find it challenging to comprehend the insurance-specific terms pertaining to various Life Insurance Policies while purchasing a life cover. Term Insurance Plans' ease of understanding is one of their key advantages.
A Term Insurance Plan does not include an investment component because it is a pure Life Insurance Policy. To provide the benefits of Term Insurance, you pay the premiums, and the insurer insures your life for a predetermined amount of time.
You may also want to know the Best Term Insurance Plan in India
Term Insurance Policies include optional riders that you can select to increase the standard Term Insurance benefits. By adding these riders, you can expand your term insurance policy for a small additional premium. The term plan's usefulness can be increased by the policyholder by adding riders to it.
They are, therefore, eligible to receive the sum assured upon being diagnosed with the critical illness by choosing, for example, a critical illness rider or critical illness plan. This is in addition to the death benefit, which is an equal sum payable throughout the policy's term. There are additional riders available, including coverage for loss of employment, disability, and waiver of premiums, among others.
To make life insurance more appropriate and meaningful, the policyholder should choose riders based on his individual needs.
Any stage of your life could see you develop a critical illness, and the cost of the required care could wipe out all of your savings.
Even though the main benefit of Term Insurance Plans is only life insurance, you can choose to add add-ons or riders to your policy to get critical illness insurance. You will receive a lump sum payment upon diagnosis of any critical illness covered by your Term Insurance Plan if it has optional Critical Illness Coverage.
Insurance companies have generally been quick to innovate, but Term Plans have seen the most innovation from them.
For instance, businesses have been prompt and proactive in reducing premium rates and even providing additional discounts to specific categories, such as non-smokers. The internet has made purchasing Term Insurance quite convenient.
A healthy person, as determined by the insurer, can purchase a term plan online without having to undergo a medical exam.
For conventional, ULIP, or endowment policies, the total amount insured ranges from 7 -10% of the yearly premium. A Term Plan, on the other hand, offers a significantly higher sum assured, allowing you to leave your family and dependents enough money so that they will not face hardship in your absence.
In other words, Term Insurance offers coverage that is roughly 60 times greater than that of traditional, ULIP, or Endowment Policies.
The benefit of having future premiums waived off under special circumstances is what the term "Premium Waiver" denotes.
For instance, this is true when an accident renders the insured policyholder permanently disabled. Only if all prior premiums have been paid is this applicable.
A term life insurance plan can be purchased for as little as 0.1% of the total amount insured. Now take into account that we pay the premium, which amounts to about 2% of the car's present value.
Additionally, compared to offline channels, online channels offer an additional discount on your Term Insurance Premiums.
As was mentioned earlier in the blog, Term Life Insurance has a number of advantages.
It offers more coverage for a lower premium, is easy to understand, and has significant tax advantages, but before accounting for all these advantages, keep in mind that the primary goal of insurance is protection, not savings. Term Insurance, unlike the majority of life insurance products, stays true to this goal.
Disclaimer: This blog is solely for educational purposes. The information quoted in this blog is not recommendatory.