Term insurance offers a life cover for a specific period in return for a certain premium amount. In the event of an unfortunate demise of the insured during this time frame, the insurance company offers a guaranteed payout. The nominee is compensated for the policyholder’s loss of income. Here are the benefits of term insurance plans.
Extensive Life Cover
This kind of insurance offers comprehensive security by covering you up to the age of 99 years and, sometimes, more.
Easy to Understand
You need to have an in-depth understanding of the terms and conditions of an insurance plan. The advantage with term insurance is that you can understand it easily. It doesn’t have an investment component. You simply need to pay the premium timely and enjoy the benefits of the cover.
High Coverage at Affordable Premiums
This is one of the top benefits of term insurance plans. They are available at very affordable premiums. The earlier you buy this kind of plan, the more pocket-friendly it is. Also, if you apply for it online, you may be able to purchase it more affordably than offline.
Critical Illness Coverage
At any point in life, you can be diagnosed with a critical health condition. Receiving treatment for it can exhaust your savings. Thankfully, under term insurance, you can not only get a life cover but also choose critical illness as an add-on or rider.
Payout of Sum Insured
If, as an insured, you pass away, your loved ones will receive the payout of the sum assured. When you buy the term insurance plan, you can choose between a lump-sum (one-time) or regular (periodic) payout. The regular payout can be received annually, half-yearly, quarterly or monthly. Thus, your family’s regular expenses can be managed.
Option of Return of Premium
A term plan usually doesn’t offer a maturity benefit. But you can get this benefit by choosing the option of return of premium. This needs you to pay a high premium amount which you’ll get back if you outlive the policy term. The total premium returned will exclude any rider premiums, the modal amount paid, taxes and levies.
Multiple Death Benefit Payouts
You as the breadwinner could be having several liabilities like a home loan and a car loan and paying EMIs for them. After your demise, the burden will fall on your family. Here the multiple payout options of term insurance helps. The nominee can choose to receive the lump-sum benefit to manage the financial liabilities or get a monthly income together with the lump-sum amount as a death benefit.
Tax Savings
You can enjoy tax savings with a term insurance plan. The premium amount paid is exempted up to ₹1,50,000 annually under Income Tax Act, Section 80C. The death benefit is completely exempted from taxation under Section 10 (10D) of the Act.
Accidental Death Benefit
Accidents are uncertain and can result in death or dismemberment. You can add accidental death benefit as a rider to your main cover to get an extra advantage.
You can not only opt for term insurance for yourself but also offer it under a group insurance scheme to your employees if you run an organisation. Typically, the cover amount should be 10-20 times the policyholder’s annual income.
