Buying a life insurance policy is the best way of securing the future of your loved ones. If you wonder which policy can be suitable for someone with a limited budget, it is time to consider a term plan.
What is a term life insurance policy?
If you are not sure what is term plan, we are here to guide you about it. A term insurance policy is a pure form of life insurance plan. The policy stays active for a specified period. If an unfortunate event leads to the policyholder’s death, the insurance provider pays a fixed lump sum to the nominees. You have to pay regular premiums to the insurer to purchase the policy and keep it active. The insurer utilizes the entire amount to fund the life cover. Hence, the policy does not pay any maturity benefit. The nominees get the death benefit only if they make a successful claim during the policy tenure.
Due to the lack of a savings option, some people do not consider the term life insurance policy a practical alternative. However, the term plan comes with many underrated features that can benefit you significantly. Below is a list of five such advantages of a term plan.
- Low premium
When compared to other life insurance plans, the term insurance premium is more affordable. As already mentioned, it is a pure form of life cover. The insurance company pays your nominees the death benefit only if you cannot be there for them. As there is no maturity benefit or option for wealth build-up, you have to pay a reasonable premium. The sum assured is also high because the insurer uses the premium towards life insurance. You can pay a cheaper premium by purchasing the policy online, thereby eliminating the charges associated with an agent’s commission and paperwork.
Most insurance providers offer additional riders with the term policy. You can enhance your existing plan by including riders in it for a little higher premium. Here are some popular riders:
- Accidental death benefit: This rider comes with a death benefit sum assured. If an accident leads to the policyholder’s absence, the insurer pays the rider’s cover along with the term plan’s sum assured.
- Critical illness: This rider offers insurance cover for a list of critical illnesses. If the policyholder is diagnosed with any of the included diseases during the policy tenure, the insurer pays a lump sum for treatment purposes.
- Accidental disability: In this rider, the insurance company will pay you a fixed amount if an accident leads to a partial or total disability.
- Tackling the uncertainties of life
The only assured aspect of life is its uncertainties. Nobody knows when an unforeseen event will topple their life forever. This is when the life insurance cover comes to the rescue. If you want to secure your dependents’ future irrespective of whether you are there or not, buying a term plan can prove helpful.
- Income replacement
With a term life insurance, you can pay an economical term insurance premium and get a large cover. This way, your family will have an income source even if you cannot be there to take care of them.
- Tax deductions
One of the best things about a term plan is that it offers tax benefits. Firstly, Section 80C of the Income Tax Act, 1961 provides a yearly tax exemption of up to INR 1.5 lakh on the premium paid. Additionally, Section 10 (10D) of the Act makes the death benefit tax-exempt, ensuring that your nominees can use the entire sum assured.
Now that you understand how a term policy is a useful life cover due to its various benefits, invest in it online. Compare different policies on the Web and find a suitable one.