Term Plan
Term insurance has been a critical financial safeguard, but the pandemic further highlighted its importance as more people recognised the need to secure their families against life’s uncertainties. This indeed is something to ponder upon, because the death of an earning member of a family is not just a personal loss but a financial one too. Here, investing in term insurance could be a good decision.
Specially designed to support a bereaved family in coping with a sudden loss,term insurance pays a lump sum of money to the policyholder’s nominee in the event of the unforeseen. Let’s dig deeper to know how it can help fight a crisis.
Why Do You Need A Term Insurance Policy?
A term insurance policy is designed to provide financial security to the family when the life assured is no more. Suppose, Mr A, a 35-year-old, has a family of a homemaker wife and two kids below 10 years of age and is the sole income earner. Mr A also has a home-loan with a huge outstanding amount. Now, if he suddenly dies at 40, there’s no regular income for the family anymore. His kids are under 15, and awaiting higher studies. At this point, Mr A’s sudden demise can make it quite difficult for his family to make ends meet, clear dues and carry on with the children’s education. This is where a life insurance term plan may emerge as a saviour. If Mr A had bought a policy with a sufficient sum assured, his death benefit would help the family maintain the existing lifestyle, repay all the dues and keep a corpus aside for the life goals like the children’s education, marriage or retirement savings. Hence, for your financial protection; you may find it worthy to purchase a term life insurance.
Who Should Buy A Term Insurance Policy?
A term insurance policy may act as a financial cushion for a family when an earning member succumbs to a sudden death. The sum assured paid to the nominee can be utilized to sail through the financial crisis by taking care of household needs, repaying debts, and funding life goals. So, if you are someone who has dependent parents or an immediate family, liabilities, and life goals to be fulfilled, term life insurance may be a worthy choice to consider.It may help you create a financial shield for your loved ones that would help them sustain if you are suddenly not there anymore.
How Does A Term Plan Work?
Now that you know what a term plan is, it’s time to understand how it functions before you decide to purchase one. A term insurance policy is basically a contract between two parties—the insurance company and the insured (policyholder). Here, the insured pays premiums, a pre-fixed amount payable in a specific schedule for the specified term of the policy, typically 10, 20, or 30 years. The premium, in a monthly, quarterly, half yearly or yearly payment schedule is charged by the insurer, to provide the insured with a death benefit or any other applicable benefit in exchange. The amount of premium is calculated depending on the policyholder’s age, gender, medical history, occupation, lifestyle, and habits alongside the chosen sum assured, policy term, and riders and usually remains fixed throughout the policy term. If the insured dies before the expiry of the policy, his/her nominee receive the entitled sum assured as a death benefit. But no payment is made by the insurer if the life assured survives the policy term and the coverage of the policy ends with its expiry date. However, the coverage period can be extended, by renewing the policy, but at a revised premium based on the age of the insured at the time of the policy renewal. The premium thus, gets increased as the age increases.
Benefits Of Buying Term Insurance
Now that you know what a term plan is, it’s time to understand how it functions before you decide to purchase one. A term insurance policy is basically a contract between two parties—the insurance company and the insured (policyholder). Here, the insured pays premiums, a pre-fixed amount payable in a specific schedule for the specified term of the policy, typically 10, 20, or 30 years. The premium, in a monthly, quarterly, half yearly or yearly payment schedule is charged by the insurer, to provide the insured with a death benefit or any other applicable benefit in exchange. The amount of premium is calculated depending on the policyholder’s age, gender, medical history, occupation, lifestyle, and habits alongside the chosen sum assured, policy term, and riders and usually remains fixed throughout the policy term. If the insured dies before the expiry of the policy, his/her nominee receive the entitled sum assured as a death benefit. But no payment is made by the insurer if the life assured survives the policy term and the coverage of the policy ends with its expiry date. However, the coverage period can be extended, by renewing the policy, but at a revised premium based on the age of the insured at the time of the policy renewal. The premium thus, gets increased as the age increases.
With a bunch of benefits, term insurance may be one of the worthy investment choices for those looking to financially secure their loved ones’ future. Here’s how
Extensive Coverage at Low Premiums:
Since there are no maturity benefits to be paid, insurance companies offer term insurances for much lower premiums. Hence, you may be able to get a large and extensive coverage, keeping it easy on your pockets too.
Tax Deductions for the Policyholder:
Premium payment for term insurance entitles the policyholder to get tax benefits. Under Section 80C of the Income Tax Act, 1961, he/she can get a tax deduction of up to Rs 1.5 lakhs annually for the premiums paid. However, this can only be availed under the old tax regime.
Tax-free Benefit:
The death benefit received by the nominee of the policyholder in the event of the unforeseen is completely tax-free under Section 10(10D) of the Income Tax Act, 1961.
Peace of Mind:
Everyone looks forward to keeping the loved ones safe from any financial struggle, even when he/she is no more. Term insurance may put the worries to an end by offering a scope to secure the family’s financial future.