Term Insurance is an actual and affordable form of life insurance plan that provides coverage to beneficiary of the insurer for a definite period of time. Term insurance guarantee a high life insurance cover amount at a very low premium to the nominee, in case of demise of the insurer. However, there is no survival benefit if the insured survives the policy tenure. Term insurance let you keep your family, loved ones secure and financially independent in your absence.
Term insurance covers the life of a person for certain period of time known as policy term, there is no investment component that’s why it is called Term Insurance.
Here are some important features of term insurance plan which makes it must have, to protect you and your family.
Features of Term Insurance
- Low Premium – The most unique feature of term insurance plan is its affordability. A high sum assured is guaranteed to the beneficiary of the insured at a very low premium, on death of the policyholder. There is no survival or maturity benefits payable to the policyholder, if he/she survives the policy term. The main reason behind its affordability is that insurer have to pay death claim only which make its low priced. The premium for life insurance plan is very low as compared to other whole life plans, money back / investment plans or unit linked insurance plans.
- High Life Cover – You can avail high life cover at the same premium as an endowment plans because of its affordability. A term plan with Rs 1 crore life cover for a 30 year old will be more feasible relative to endowment plan with same life cover amount.
- Pure Life Insurance – Other form of life insurance comes with savings and investment components which will not suffice the financial requirement of your family. Whereas term insurance is an actual form of life insurance with no such investment / income component which offer a good lump sum amount to beneficiary of the policy holder.
- Zero Capital Build Up – There is no capital built up on maturity or at the end of tenure / policy term. Premium of term insurance plan is solely the cost of insurance against risk of death. You doesn’t get any payout, once you stop making premium payment or policy matures.
- Flexibility to pay premium – Term plan provide flexibility to pay premium to policy holder – monthly, quarterly, semi annually, annually. You can choose any of the payment option as per your convenience and budget.
- Tax Benefits – The premium paid under term insurance plan, is eligible for tax benefits as per section 80C of IT act and proceeds of the policy also entitled for tax benefits under Section 10(10D) of IT Act, 1961.
Rider – Following additional rider benefits on term insurance plan are available on payment of additional premium amount.
- Accidental Death
- Critical illness
- Partial / Permanent Disability
- Waiver of Premium
- Income Benefit Rider
Benefits of Term Insurance
- Affordable – Term Life Insurance plan offer you low premium rates with high risk cover as compared to other investment cum life insurance plans.
- Death Benefits – Term insurance assures a high lump sum amount death benefit payable to your family or loved ones. If you are the sole income source of your family, then you must have term insurance. In event of your sudden death, term life insurance policy will provide financial security to your family.
- Maturity Benefits – In case pure term insurance plan, no maturity benefits are payable if the policyholder survives whole tenure of the policy. However, you can also opt for TROP (Term Return of Premium) plan which is a variant of pure term life insurance plan and offer survival benefits by returning the total premium paid so far.
- Safeguard against debts, liabilities – Term plan act as safeguard for your family against any kind of loan, debts and liabilities in event of your death. Death benefits are paid to nominee or beneficiary of the policyholder. Lump sum amount that your family or nominee get, helps to pay off all loan and liabilities and bring financial stability.
- Tax Benefits – The premium paid on term insurance plan and sum assured enjoy exemption under section 80C and u/s 10(10D) of the IT Act, 1961.
- Rider Benefits – Term insurance offer you rider benefits which can be availed with payment of additional premium. For example, Waiver of premium rider offer you the protection of term insurance policy in case of loss of source of income on permanent disability.
Why you should buy term life insurance ?
Term life insurance is most basic form of insurance. After reading above features and advantages of term insurance, you must have understand that how much important financial instrument a term insurance is. If you are the only bread earner in your family then secure future of your family by getting a term plan.
Ask yourself whether your family will enjoy the same lifestyle, pay off debts and liabilities when you die. Certainly, you don’t want your family to face financial difficulties, in paying for your child’s education, meet household expenses, maintaining same standard of living etc. So least you can do is secure your family future by buying a term life insurance policy.