In today’s times, it is paramount to have insurance coverage to protect yourself and your family from various uncertainties. Over the years, as the demand for life insurance policies has increased significantly, insurance companies in India today offer a variety of insurance plans to suit the varying needs of the people. In such a situation, choosing the right plan can be overwhelming, and challenging. But, choosing the right policy mainly depends on your personal needs.
While choosing the right life insurance policy, you must consider your age, the number of dependents, the coverage amount you need, and the features and benefits of different types of policies available in the market. One of the most popular types of life insurance policies is the Term Insurance plan. Let us look at its advantages over other types of policies.
- One of the most significant differences between a term insurance and other types of life insurance policies is that a term insurance provides death benefit to the policyholder for the low premium. The nominee receives the amount in the event of the unfortunate demise of the policyholder before the end of the policy term. However, this does not necessarily mean that term insurance is the least expensive insurance.
- While purchasing an insurance policy, most people make their buying decision based on the premium amount. Term insurance has one of the lowest premiums amount other life insurance policies. This is because it is a pure protection policy, and it does not have any investment component. The premium you pay is used completely for life protection.
- Unlike other types of insurance policies, term policy has simple and easy to understand terms and conditions. You pay a fixed premium amount for a fixed duration; you need not worry about returns or investing in different instruments. In the event of your unfortunate demise before the end of the policy term, the death benefit will be paid to the nominee.
- Another significant benefit of term insurance over other types of policies is that both the premium and the pay-out are eligible for tax deduction. The premium you pay towards the term insurance policy is eligible for deduction under Section 80C to a maximum limit of 1.5 lakhs. In the event of your demise before policy expiry, the pay-out received by the family is fully exempted from tax under Section10(10D) of the Income Tax Act.
- Typically, most term life insurance policies provide the death benefit in lump sum. But, there are some insurance policies that give policyholders the flexibility to combine lump sum pay-out and monthly income. This can help the family of the policyholder get regular income.
- It is a known fact that term insurance is a pure protection policy. But, you can increase the scope of the protect with add-on covers. Based on your needs, you can purchase riders like waiver of premium, that allows you to stop paying the premium if you suffer from a critical illness. With this rider, the policy will not lapse, and you can continue to stay protected. Also, you can consider buying an accident benefit rider or critical illness rider that pays a partial amount in the event of illness or disability due to the accident.
Thus, a term policy is beneficial in more than one way. As an earning individual and a responsible family man, the least you can do to protect your family from any unfortunate event is buy a term insurance cover for them.