In a life full of uncertainties we can never predict the future. But in spite of all the uncertainties what we can do the least is being prepared for emergencies. It can be a nightmare to imagine our families without us, the financial problems they will be facing makes this nightmare even worse. So, what should one do now? Will all our savings and investment be enough for all our family members to live a secured life? To make sure that our families are financially secured in our absence, one can include a term insurance plan in his/her financial planning and investments.
What is a term insurance plan?
The Term Insurance plans are the most basic type of life insurance plan that gives coverage for a specified period. These plans provide a guaranteed death benefit paid to the nominee in case of the death of the insured person during the specified time period as per the policy signed.
The premium charged for a term insurance policy is charged on the basis of the insured individual’s age and life expectancy and prevailing medical condition. It’s important to know that the insurance provider will also ask for your drinking and smoking habits before they provide you with the cover.
The payout of coverage amount depends on the following factors-
- If the policyholder dies within the specified time period of insurance- In this case, the entire coverage amount will be given to the nominee.
- If the policyholder dies after the time which is specified in the policy: In this case, there will be no payout.
- If the policyholder does not die within that particular time: In this case, there will be no amount paid to the policyholder in spite of paying regular premiums. As term insurance is a no return investment in case of survival of the policyholder.
- However, one can always opt for ROP i.e return of premium where you will get a total amount which you have paid towards the premium of the insurance after the detection of GST tax.
- Even the policy-holder can opt for the renewal of the policy but before you come to this you should always think of the premium charged as this totally depends on your age, health and life expectancy.
Importance of Term life insurance
Financial Security: The sum assured under a term life insurance is a significant factor that can add to the financial security of your family when you are not there. Even the amount paid as a premium for the policy is affordable. This has made Term insurance affordable as you are assured of a substantial cover at minimal costs.
As compared to the benefits the premiums are much lower than other insurance plans such as life insurance. As on average, the term insurance plan for an individual between the ages group of 30 to 35 can range from 15,000 to 20,000 approximately. This low premium allows you to afford an optimal sum assured so that you can ensure sufficient financial security for your family in your absence.
Income Tax Benefits: Having a term insurance plan comes with income tax benefits. Under which one can claim a tax deduction of up to Rs 1.5 lakhs per year under Section 80C of the Income Tax Act for a term insurance plan. However, the covered amount when paid to the nominee is also tax-exempt.
Easy to Buy: With the rising internet penetration a term insurance plan can be availed online. The online availability also brings lots of options to you making it easier to compare and then select one as per your requirement. Apart from this, the term plans bought online are cheaper than regular term plans which are bought through agents.
Low claim Rejection: The probability of rejection of the policy is zero due to non-disclosure of facts after the policy has been in operation for two years.
Additional benefits in case of disability – Some term life insurance plans also waive off the premiums payable in case of any permanent disability. But you need to look for this feature before you select your term plan as all term insurance plans do not offer this feature.
After knowing the numerous benefits of term insurance plan, it can be concluded that if you want your family to live a worry-free and secure life in your absence then having a term insurance plan is a must.