Term Insurance Plan
What is Term Insurance?
Term Insurance is a straightforward life insurance option designed to offer financial security to your loved ones for a predetermined period, known as the policy term. Should the unfortunate occur and you pass away during this term, the insurer provides a death benefit to your chosen beneficiaries.
The primary aim of a term insurance plan is to furnish your loved ones with financial support in your absence. This assistance can aid them in managing their expenses, achieving their life aspirations, and settling any outstanding debts. In exchange for this financial protection, known as the sum assured, the policyholder must make regular premium payments to the insurer.
For instance, consider Mr. Johny Massi, a 25-year-old individual who purchases a ₹1 Crore Term Insurance plan with a policy duration of 30 years. His monthly premium starts at ₹546 for the first year and increases to ₹583 for the remainder of the policy. In the event of Mr. Johny Massi’s demise within the policy term, the nominated individual(s) will receive the sum assured of ₹1 Crore to support them financially.
A term insurance plan may prove to be useful in several ways:
Protect Your Loved Ones Financially: One major reason people may buy term insurance is to secure the future of their loved ones financially. If the life insured passes away and tough times arise, the payout from a term insurance plan may act as a financial recoup.
Be Easy On The Wallet: Term insurance premiums may be comparatively lower than other plans’ premiums. This may be because term insurance policies do not have any savings or investment element as a part of their structure.
Helps in Protecting Your Family's Assets: One may consider buying a term insurance plan as the financial payout from the term plan may help your family pay off outstanding debts or liabilities, if any.
Offers Add-ons/Riders: Add-ons/riders are additional coverages that may be added to term insurance plans by paying a nominal extra premium. Some term insurance add-ons may include critical illness benefit rider, accidental permanent total/partial disability rider, accidental death benefit rider, waiver of premium rider, family income rider, amongst others.
Helps You Stay Prepared for Uncertainties: Uncertainties do not come announced; they may often crop up with no warnings and leave one shocked and disturbed. A term plan may not help you avoid uncertainties, but it may help you stay prepared for them.
Parents:
For a parent, few things may be a top priority such as securing the future of their child. They work hard so that their child may pursue their dreams. As a parent, you may not want to think of a scenario in which you are no longer there for your child. However, unfortunate times may strike anytime and leave your child bereft of the security you provide. With a term insurance plan in place, you may rest assured your child has the support to continue living a financially secure life.
Newly Married Couples:
You and your spouse may have a large list of things to tick off at the start of a new life, together. You may want to go on an exciting honeymoon or buy a house together. In the excitement, worries related to future finances may take a backseat. However, buying term insurance when one is newly married can be quite beneficial. Term Plan may be considered important if one spouse depends financially on the other. If one is young, the term insurance premium may be lower, too.
Working Women:
As a working woman, you may be giving your best to ensure a financially strong life for yourself right now. However, you must not overlook the future. A term life insurance plan may be the answer to the financial challenges it may bring. If an unfortunate event were to occur, your loved ones may not face a financial strain. This may allow you to focus more on the present.
Young Professionals:
In the heady excitement of youth, one may not exactly have the prospect of buying term insurance at the top of their mind. However, if your family members depend on your earnings to any extent, a term insurance plan may be necessary. Moreover, the term insurance premium of young people may be on the lower side, since they may be relatively healthier than older people.
Taxpayers:
Taxpayers may benefit from buying term insurance plans, because of the substantial tax benefits under Section 80C and Section 10 (10D) of the Income Tax Act of 1961 subject to satisfaction of conditions mentioned therein. One may claim a tax deduction of up to Rs 1.5 lakhs under Section 80C of the Act under old tax regime. A tax exemption on the death benefit pay-out may be gained under Section 10 (10D) of the same Act, provided the terms and conditions mentioned therein are met. You may want to consult your tax advisor for more details.
Self-Employed Individuals:
Being a self-employed individual may bring a different level of professional freedom. However, it may also lead to a bit of unpredictability due to the lack of financial security. As a self-employed person, you may buy a term insurance plan online or offline to make sure any present instability does not affect the future of your loved ones.
Retirees:
Even during retirement, you may have a source of income on which your spouse or your children may be dependent. Your demise may cause them financial worries on top of the emotional strain. Hence, a term insurance plan may help in serving as the right solution to such concerns. A term insurance plan may also help in allowing you to leave a legacy for your children or grandchildren.
Term insurance plans provide straightforward coverage for a specific period. Let's delve into how they work with an example:
If a life insured passes away during the policy term, the nominee(s) of the term insurance policy can raise a claim against the policy. The claim undergoes processing by the insurance company, and, if approved, the sum assured is disbursed to the nominee(s).
When you purchase a term insurance plan, whether through offline or online channels, you commit to paying a premium for the life insurance coverage. These premiums are essential to keep the policy active. The premium amount and the sum assured are predetermined and remain fixed throughout the policy's duration. However, in some instances, certain plans may allow for fluctuations in the term insurance premium and/or the sum assured after a specific period.