What is Term Insurance?Term insurance is a type of life insurance product that provides a large sum assured to the policy buyer at a relatively affordable premium. Term insurance plans can usually be purchased for a policy tenure ranging anywhere between 5 years and 40 years. The catch to this kind of life insurance is that usually it does not carry any survival or maturity benefits, unlike whole life policies or endowment/money-back policies. Term insurance plans are much cheaper compared to whole life insurance plans because these plans carry no cash value. Term insurance plans provide pure financial protection benefits. This means that if the life insured dies during the policy term, the beneficiary will receive the death benefit, provided all premiums are paid and the policy is in force. If the person survives until the end of the policy term, no benefits are payable to anyone. In most cases, term insurance plans offer a level premium rate, wherein the policyholder is charged the same premium for the duration of the policy tenure. However, in such cases the premium payable will increase during renewal of the policy based on the concerned individual’s age at the time. While the coverage provided by a term insurance policy is more or less fixed, most life insurance providers offer a number of riders that policy buyers can choose to purchase along with a term policy.
Why you Need to buy Term Insurance?
For those who have dependents whom they look after, term plans are ideal as they provide a large payout for very cheap premiums. Individuals can choose a high sum assured while paying a low premium. This way, if the breadwinner/policyholder passes on from this life, the people who relied on them will receive a substantial amount that will help them get by financially. These plans have a set duration limit and the cover will be offered only for this period. Once the plan lapses, the holder can choose to renew it or give up all benefits. Listed below are a few reasons to purchase term insurance plans:
Provides financial security: The primary purpose of a life insurance policy is to provide financial security to one’s dependents. The benefit that is paid to the nominee in the event of the policyholder’s death can help one’s family members meet their short-term and long-term financial goals.
Helps deal with liabilities: If you have liabilities like loans or credit card debts, it is vital that you purchase a term insurance policy at the earliest. The payout provided by your policy can help your dependents clear off your liabilities without having to go through any additional hassles.
Highly flexible: Term insurance plans are highly flexible in nature. Most insurance providers offer term insurance plans through both online and offline channels. With regard to the policy tenure, policy buyers can choose any policy tenure between 5 years and 30/40 years. Further, prospective buyers can also choose a sum assured as per their needs.
Riders: Insurance providers offer a number of riders along with term insurance plans. Some of the popular riders that are offered include the Accidental Death Benefit Rider, Accidental Death and Disability Benefit Rider, Critical Illness Rider, Waiver of Premium Rider, etc. As a policy buyer, you can choose to purchase any rider offered by an insurance firm and receive an enhanced coverage.
Tax benefits: Term insurance plans also offer tax benefits to policy buyers and their nominees. You can claim tax rebates under Section 80C for premiums paid. Similarly, your nominee will also be able to claim tax benefits for any payouts received through the policy under Section 10(10D) of the Income Tax Act.