Financial planning is a crucial part of securing your future that consists of many facets such as investment and insurance. However, in a country like India, people suck bad at financial planning as they never get a chance to learn about it.
That’s because money is such a topic that isn’t allowed at the dinner table. If you’re from a typical Indian household and ask something about money to your parents, most probably they’ll say “You don’t have to worry about it. Focus on your studies instead.”
To make a change and make people sounder about money and finances, we have covered a wide range of topics related to term life insurance policy, including its benefits, factors to look at while purchasing one, and some myths revolving around it.
Benefits of a Term Life Insurance Policy
Before jumping on the benefits of term plans, you should know that they’re available in a variety of choices. Depending on your preferences, you can choose from a wide range of plans as per your financial requirements. Here are some prominent benefits of term life insurance policies:
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Affordable Premiums
As compared to any other life insurance product (money-back plan, ULIP, and many more), term plans require lower premiums and provide comprehensive coverage at an affordable rate. Unlike other plans, it focuses solely on safeguarding your family from the occurrence of death with no market-linked investment involved.
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Tax Benefits
Term life insurance policies also work as tax-saving tools as they provide rebates and benefits in two phases. According to Section 80C of the Income Tax Act of India, premiums paid for term plans are eligible for tax deductions of up to Rs. 1.5 Lakhs. Moreover, as per section 10(10D) of the Act, the death benefit proceeds are also completely tax-free.
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Easy to Understand
The best thing about term plans is that they focus on a single purpose: to cover your risk against death. There are no technicalities involved in term plans as they don’t invest your capital anywhere. You just have to pay the periodic premiums and enjoy the life cover.
4 Things to Consider While Buying a Term Life Insurance Policy
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Cover Amount
To ensure that your term plan can help with your family’s finances in your absence, you have to choose an adequate coverage amount. It can be determined by assessing your present age, financial responsibilities, future goals, current loans and debts, lifestyle expenses, and rate of inflation. You can even find the best term insurance plan for 1 Crore worth of cover too.
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Policy Tenure
The younger you purchase a term life insurance policy, the more benefits you can yield out of it. To determine an ideal policy tenure, you should come up with the expected retirement age and subtract your current age from the figure. The difference between the two should be your ideal policy tenure.
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Payout Options
Term plans offer different payout options namely lump-sum, increasing monthly income, level monthly income, and so on. Keep in mind that your policy’s premium is also affected by the type of payout option you choose. Therefore, make sure you choose one as per your family’s future requirements.
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Insurance Company
Being a popular life insurance variant, term plans are being offered by several companies, which makes it overwhelming to choose a reliable partner. To shortlist a good insurer, you should consider checking their claim settlement ratio, solvency ratio, market reputation, and financial background.
Busting Common Myths About Term Insurance
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Insurance Without Return Isn’t Worth It
There’s a keen difference between insurance and investment. While the latter provides monetary gains, the former is protecting your risk against death. It ensures that your family doesn’t have to experience financial depreciation in the event of your death.
Moreover, with the availability of term plans, you can gain comprehensive cover at very nominal rates. It’s worthless to confuse insurance and investment as they both serve different purposes that are essential for a sustainable future.
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Buying a Term Plan Too Early or Too Late is Not Beneficial
Term plans allow you to choose the desired tenure for your coverage based on your requirements. With that said, it’s never too late or too early to purchase a term plan as it is affordable anyways. The earlier you purchase it, the more affordable it will be.
On the other hand, even if you purchase it at an older age, it would still be more affordable than other life insurance products and you can choose a shorter term as well. What’s non-beneficial is not purchasing the policy at all.
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Term Plan’s Coverage Cannot be Increased
It’s one of the most communicated myths about term life insurance policies. However, it’s completely false that you cannot increase your coverage in a term plan. Once your policy’s tenure is expired, you can choose to extend it or convert it into a whole life policy.
Moreover, some policies available in the market also allow you to increase your plan’s coverage through built-in customization options. While it may cost slightly higher than a pure term plan, the benefits are surely worth it.
Bottom Line
Term insurance is a lot cheaper than other life insurance plans. It is the best option for people who are not financially settled, and it’s also suitable for those who are in their early 20s. Moreover, insurance is an important part of every individual’s life.
It gives you the peace of mind that your family will be taken care of no matter what. For the above reasons, we believe that a term insurance plan is a viable option for people who want to protect themselves and their families against untimely death.
When it comes to choosing the right plan for you, many factors should be considered. If you’re reading this far, we hope now you know the essentials to choose the right term life insurance policy as per your needs.
