Meaning of Term Insurance
Term Insurance is the simplest and purest form of life insurance.Term insurance is for a short period of years ranging from 3 months to 7 years sum assured is payable only in the event of death of the life a short occurring during the period; but the assurance comes to an end should the life assured survive. It provides financial security to the family at the most affordable rates. With term insurance, there is a large amount of life cover (i.e. sum assured) at a relatively low premium rate. The benefit amount is paid to the nominee on the death of the insured during the policy term.
Features of Term Insurance
Features of term plans include the following:
Affordability: Term insurance policies are some of the most affordable life insurance products. The premiums you have to pay for term plans are usually much lower than other life insurance policies. Life insurance cover up to ₹1 crore can be availed at a minimum monthly premium of ₹378/-*.
Age of entry: With a minimum eligibility age of 18 years, term plans can be availed early in life. Buying a term plan at an early age helps in getting bigger coverage at a very reasonable premium.
Policy Term: Term insurance provides coverage for a specified number of years, known as the policy term. In case of any unfortunate event during this period, the nominee will receive the sum assured in the policy.
Maturity Benefit: Term insurance provides financial protection to beneficiaries' family in case of an eventuality. It is not meant to be used as an investment instrument. Thus, it does not give any return on the premium paid in the fortunate case of surviving the policy term.
Flexibility in Premium Payments: Term plan premium can be paid as per convenience. Such as Annually, semi-annually, quarterly, or monthly premiums. Such regular premium payments are ideal for salaried individuals with a stable income. Any one can also go for a one-time, lump sum premium payment.
Life cover: A term plan protects the family from financial challenges if an unfortunate event occurs. It offers life cover of choice at an affordable premium. With this life cover, loved ones get an assured amount in case of any untoward incident during the policy term. The payout can help the family avoid compromising their lifestyle in the absence of the insured.
Additional add-ons: Riders or add-on benefits can be added to a term insurance policy to increase the scope of insurance coverage at a nominal cost.
Tax benefits: Term plans offer many tax benefits. Under Section 80C of the Income Tax Act, 1961, a deduction of up to ₹ 1.5 lakh can be claimed on the premium paid for a term plan. The payments are also tax-exempt under section 10(10D). Additionally, with an add-on health-related rider, tax benefits under Section 80D can be availed on the premium paid for the rider.
Premium waiver: This benefit waives all future premiums in case of disability due to an accident. Therefore, even if one fails to pay the premium due to disability, term insurance is still able to secure the future of the family.
Need of term life insurance
Financial Protection: Term life insurance offers a specific death benefit to beneficiaries, providing a financial safety net.
Affordability: Generally more affordable than permanent life insurance, making it accessible for many individuals.
Temporary Needs: Ideal for covering specific financial obligations like mortgages, debts, or children's education during a defined period.
Flexibility: Policyholders can choose the coverage term based on their anticipated financial responsibilities.
Peace of Mind: Assures policyholders that their loved ones will be financially supported if they pass away during the term.
Convertible Options: Some policies allow conversion to permanent life insurance if needs change over time.
Income Replacement: Term life insurance helps replace the income of the policyholder, ensuring financial stability for the family.
Estate Planning: Can be used as a tool in estate planning, providing liquidity to cover estate taxes or other expenses.
No Cash Value: Unlike some permanent policies, term life insurance doesn't accumulate cash value, keeping premiums lower.
Customizable Coverage: Policyholders can choose the coverage amount that aligns with their family's financial needs.
Business Protection: Business owners can use term life insurance to protect their businesses by covering key individuals or providing funds for buy-sell agreements.
Renewable Options: Some policies offer the option to renew at the end of the term, although premiums may increase.
Simplicity: Term life insurance is straightforward, focusing on providing a death benefit without complex investment components.
Financial Support for Survivors: Helps survivors maintain their lifestyle and cover ongoing expenses after the policyholder's death.
Ideal for Temporary Needs: Suited for situations where financial responsibilities diminish over time, such as when a mortgage is paid off or children become financially independent.
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