Term Insurance is probably the most affordable and hassle-free form of life insurance. Like any other life insurance, you pay a premium at fixed intervals and the family, and the loved ones of the insured will get the sum assured of the policy in case of his unexpected death. The specific feature of Term Insurance is that it is active only for a specific period or a particular “term”. Hence, even the best term insurance plan is easy to follow and acquire.
What is Term Insurance?
Term Insurance has all the features of a Risk Cover Policy. It helps you and your family to face any financial risk that arises on the event of your unexpected demise. The risk covered is known as the Sum assured which is payable to the chosen nominee on death of the insured individual.
As the name says, Term Insurance offers life insurance coverage for a stipulated number of years, and you get the benefit only if the death occurs during that period. The normal period for term insurance is 20 years although it can extend up to 30 years as well.
Features and Benefits of the Best Term Insurance Plan
Term insurance allows your family to continue a decent lifestyle, achieve their financial goals, pay off debts. There are various riders or add-ons to Term Insurance Policy that can offer you more advantages. But the basic benefits of Term Insurance policy are:
High Coverage at Low Premium
The biggest advantage of Term Insurance Policy is its low cost compared to regular life insurance. For term insurance, the insured must pay only for the death coverage or the sum assured your nominees will get in the event of the death of the insured during the term of the policy.
The cost of the policy is especially lower if you buy it online and the benefit is directly transferred to the insured. The premiums are even lower if the insured is younger. Hence the earlier you buy term insurance, the better. For instance, for a term plan cover for a 25-year-old male coming to 50 lakh, he only needs to shell out less than Rs.4200 a year or less than Rs. 12 a day as premium.
Term Plans are ideal for obtaining high coverage for a lower outgo of cash.
Simple Term Plans
Term Insurance policies are simple and uncomplicated to understand. There is an absence of investment element attached to it like an endowment or cash value plans. In these plans, it is difficult to calculate what percentage of the premium goes into risk cover and what goes into investment. Planning your financial future is easier with term plans rather than insurance plus savings plan.
In term plan, the insured has to pay the premiums annually for which he will be receiving death benefit during the policy term. The policy can be bought easily without help either online or through an agent.
The premium as well the sum assured of the term plans are exempted from tax under various sections of the Income Tax Act. Term insurance premiums are exempted from tax under section 80 C. This holds good for premium amounts up to 1.5 lakhs as long as the required conditions are met. This rebate can be availed for the premiums you pay for your family members as well.
The complete payout amount given out on the death of the insured or maturity of the policy is deducted from tax under section 10 D of the Income Tax Act.
Pay off Liabilities
During your lifetime, there may be situations where you will need to take loans and debts for education, property purchase, and so on. These liabilities will weigh heavily on your family financially in your absence. Term insurance cover will ease this burden considerably.
Term Insurance policies are flexible. Opting out of the term policy is simpler than other policies. You need to stop paying the premium to end your coverage and the policy itself. Whereas in a regular life insurance policy, you will get the benefit only if you hold on to the policy for the full tenure.
Moreover, most term policies can be converted or renewed. You may convert your term policy to an endowment policy of your choice with a premium rise or renew it for another term.
The option for converting your policy to full life insurance is helpful in any unforeseen event such as frail health or the sudden need to hold the policy for more number of years than originally planned.
This renewable and convertible option lets the inured enjoy higher coverage beyond their affordable limit. They may also lock in the premium amount until they have enough funds to manage the increased premium values.
Options for Death Benefit
Regular term plans offer the whole amount on the event of death or policy maturity. But there is also the option of a plan that combines monthly income along with lump sum payment. This option will help in dealing with regular expenditure.
When you compare Term Plans offered by various insurance providers, you will find that they offer critical riders that you can compare and analyse. Some of them are:
An insured person can collect a major portion of the sum assured while he is still alive under the condition that he is terminally sick.
The premium may be waived if the insured suffers a disability lasting for more than six months.
If the death occurs due to the accident, some term policies may give double or even three times of the promised coverage amount.
Serves as Temporary Life Insurance for the Youth
Term insurance is the best option if one is looking for temporary life insurance cover especially if he is among the younger population. If coverage is required for less than ten years, term insurance will work out more economical than a regular full life insurance policy.
Rule of thumb is that term insurance works better if the policyholder is below 45 years of age.
Moreover, young applicants who are just settling down will have a fixed budget. Term insurance will fit their needs perfectly as it offers good coverage for a low premium.
The other uses of any of the best term insurance plans are:
- Companies may provide term insurance to the employees.
- Term insurance can be supplemented with whole life policies or can be added as a rider.
- Term insurance can be a way of providing a financial safety net to meet any monetary needs that may arise in the future.
Term insurance plan is one of the most popular preferred plan by many investors.
Term insurance plans provide various benefits such as coverage until the insured is 99 years old, waiver of premium in case of disability, 100 % payment in case of terminal sickness, limited period payment, and critical illness coverage.