Term insurance: everything you need to know

This guide will cover everything about term insurance plans and how they can secure the future of your loved ones

Pretty lady teaching about insurance

Every year, many Indian citizens lose their lives in road accidents. Similarly, people die because of events like drowning, illness, and many more.

With such a high mortality rate, every individual should have insurance coverage. Unfortunately, people don’t know much about term plans, term insurance premium calculator and the benefits of taking insurance.

But do not get baffled with these terms. This guide will cover everything about term plans and how they can secure the future of your loved ones.

What is term insurance?

Term insurance is defined as the simplest form of life insurance. Besides, it is also one of the most affordable insurance options.

This type of insurance does not have an investment component. It simply guarantees a payout on the demise of the policyholder. In most cases, term insurance does not offer survival benefits. Besides, the premiums are low at the beginning but gradually increase as the insured’s age increases.

In the case of a term insurance plan, the family of the insured receives the sum assured. However, if the policyholder survives the policy term, no benefit is provided.

How to buy insurance?

Individuals who want to secure the future of their loved ones can purchase term insurance online or offline.

You can take a term plan by visiting the insurer’s official website or through an insurance aggregator. When buying online, you can use a term insurance premium calculator to understand if you can afford the premium.  Besides, you can also buy term plans through agents and brokers.

For people who have dependents in the family, it is essential to buy a term insurance plan to secure their future. In your absence, the sum assured received by the insurance provider can be used by dependents to fulfil their needs.

Benefits of term insurance

Provides financial security

Untimely demise is an unfortunate event and is followed by financial liabilities borne by the family. To avoid such situations, it is best to invest in a term plan that helps take care of the family’s financial needs.

Cover for whole life

One of the major benefits of taking term insurance is that it provides comprehensive security where the policyholder is covered up to the age of 99 years and more.

Low premiums, high coverage

One of the significant advantages of taking a term policy is that it comes at low premiums. When compared to other insurance policies, a term insurance plan is available at pocket-friendly premiums. Also, the earlier you buy the plan, the lower will be the premium.

A term plan premium calculator can be used to get a better understanding of the premium amount.

Offers protection from illnesses

A few term insurance policies provide critical illness benefits to help get good treatment for serious diseases without worrying about the costs. Some term insurance plans provide coverage for more than 40 diseases.

Riders

For those who don’t know, you can strengthen your term plan by adding riders options. Most insurance companies offer riders by paying an additional amount.

Provides tax benefits

A term insurance plan offers a tax rebate of up to 1.5 lakhs on the premium under section 80C of income tax. Moreover, the lump sum paid under the term plan is exempted from tax.

Multiple options for payment of premium

Lastly, a term plan allows you to be flexible while choosing the tenure. You can choose to pay premiums regularly or through limited pay options.

Points to remember when buying insurance

If you know what is life insurance and how important it is, you must consider taking a term plan. But, there are some points to remember when buying insurance.

Analyse the cover amount

Firstly, you must analyse the cover you need. For this, it is crucial to consider aspects like age, financial responsibilities, basic expenses, future requirements and current debts.

Determine the period

Next, you must determine the period of the policy. A rule of thumb is that the younger you are, the longer the policy should be.

For example, if you are currently in your 20s, a term of 40 or more years is advisable. In case you are 50, a term of 10-15 years is advisable.

You can also determine the period based on your financial responsibilities. Suppose you have taken a loan for 20 years, then the policy period should be 20 years.

Decide the payout option

People who have taken a term plan can opt for a lump sum payout or regular monthly payout. It is advised to choose the payout option as per requirement and feasibility.

Choose the right insurer

Lastly, opt for a trusted and reliable insurer. Check the market reputation of insurance service provider and look for customer reviews.

We hope this offered you a better understanding of term plans and their importance.

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