Life is short, and no one could predict what’s there in one’s future. For ensuring the financial security of your family even after you’re gone, you must opt for term insurance. It helps you to prepare for such unforeseen events. Term plans are one cost-effective alternative for mitigating risk and is much popular primarily as it has low premiums, yet the deceased’s family receives the agreed lump sum value.
Understanding the Term Insurance Plan
Today, term plans have become very accessible to people as most of the people buy term insurance online. Term Insurance plans are pure life insurance policies where the premium are required to be paid at fixed intervals by the policyholder and the insurer pays the nominee of the policyholder the sum assured on the demise of the policyholder while the policy is in effect.
There’s no maturity benefit under this policy in case the policy holder lives longer than insurance term.
Here are some of the reasons why you must have term insurance:
You shouldn’t confuse yourself by considering a term plan as an investment alternative. It’s mainly a way of securing the future of your loved ones. In case one has a term plan, his family would be in a position to continue a comfortable life in case of untimely demise of the policyholder. One should remember that one’s need would keep on changing with time, and one must review and revise the insurance cover periodically. For instance, one could take a term plan of INR 1 Cr., however, the same might require revision when the policyholder has a family.
In case of an unforeseen happening, debts such as personal loans and home loans could put one’s family under deep financial stress. A term insurance policy could provide the family of the policyholder a safety shield against outstanding debts when one isn’t around.
Term insurance plans are particularly intended for a long time span. Availing a term insurance plan along with suitable life cover helps in achieving long-term objectives such as children education, debt payments, and marriage even if the policyholder isn’t around.
Since there’s no investment component in insured amount, a premium to be paid for a term plan is much lower as compared to other insurance policies. An individual might need to pay around 1% of his yearly income for getting term insurance.
Flexibility is one of the key advantages when it comes to term plans. One could buy term insurance online or offline. Also, for some online policies, insurers don’t assert on health check-ups in case the life cover is less a specified amount (INR 50 lakh in most cases).
Section 80C of Income Tax Act, 1961 offers an exemption to the individuals for the premiums paid for term insurance up to INR 1.5 lakh annually. Further, the death benefits that are received by a nominee of the policyholder are also tax-free. However, policies issued after April 1st, 2003, the policyholder won’t be able to claim the tax benefits in case the premiums paid during the term of the policy for any of the years exceeds 20 percent of the Sum Assured.
A term plan offers several advantages. It covers education and various other expenses of one’s family, pays off debts and outstanding loans taken during the lifetime of the individual. It’s certainly a sensible decision especially when one’s life is so uncertain.