Nowadays people slowly but have realized the necessity of having a term life insurance. With the increasing pace of life and uncertainties rising by the day (just like Covid19 pandemic), every family is very much need of a life cover, so they can deal with the loss of a loved one, at least financially. To gather this increasing demand of term insurance, the insurance providers are coming up with online term plan that cater to varying needs of different individuals. A Term life Insurance is considered to be a cost-effective way of safeguarding your family’s financial future with low premiums. Your family will be entitled to get the entire amount when you’re gone. Therefore, having a term plan will give you a peaceful life and you won’t be worrying about the future financial stability of your family (in your absence).
It is very important to note it down about Term Insurance plans is that if the insured survived the policy tenure, the insurer won’t be paying any maturity or survival benefits to the policy holder. Though, nowadays many insurers have introduced a benefit whereby they will be paying back a certain portion of the premium paid.
Some of the prerequisite before opting for a life cover are:
- The life cover should be able to provide sufficient income to your family in your absence.
- The policy tenure should cover the span that you plan to work i.e. It should cover at least 65 years.
Opting Term Plans will provide you a wide range of benefits, such as:
Low Premium:
The insured portion any term Insurance plans doesn’t have an investment element. This is the basic reason why the premium amount for term plans is drastically lower than other insurance plans. Mathematically, an individual would have to pay approximately one percent of his annual income to get a life cover.
Provides you with Financial Security:
In most of the cases the death of the breadwinner or earning member of the family brings a family’s life to a standstill. In such a case, managing day to day household expenses and taking care of the family’s basic needs becomes an exceptionally difficult task. Its important to invest in a term insurance plan that will help your family to meet these needs even in your absence.
No Brokerage:
Whenever you are paying the insurance premium, you’re also paying a certain amount towards brokerage fees. Generally, this brokerage fees decreases over time of the policy tenure and accounts for 5-6% of the total premium.
Securing the future
Every earner of the family is having some responsibilities and obligations towards his/her spouse, children and parents. A death can paused you from meeting those responsibilities & obligations. With a term insurance plan, you can plan your future obligation accordingly. In case of an untimely death, your family not only be facing a loss of a loved one but also be finding it hard to manage finances. However, if you opt for a term plan, in such a situation the money received from the insurance company will ensure that your children get a good education and have funds for their marriage. Additionally, with the right life cover plan, your spouse and parents can live a comfortable life rather than facing any financial hardships.
Low rejection Claim
In general, there would be lower claim rejections if the policy has been active for a period exceeding 10 years. Therefore, it is important to make complete disclosures about the health, habits and financials to ensure that the claim by the family member is not rejected in the event of your death. Recently, the IRDA (Insurance Regulatory and Development Authority) has given its directive that two years after the policy comes into effect, no insurance company can reject a claim stating non-disclosure of facts.
Riders can be added
Term plans also allow you to add riders like, critical illness, accidental death cover or specific disease riders, like cardiac cover etc. These riders are additional benefits provided against a nominal premium.
Income Tax Benefit
The government is encouraging its people to buy term insurance policies by giving some financial assistance in form of Income Tax Deduction. The premium paid against the term insurance plan can be claimed as deduction under section 80C of the Income Tax Act.
Disclaimer: The contents of this article are for information purposes only and does not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.
