7 Benefits Of Buying A Term Insurance Plan

Term life insurance is a valuable tool for financial planning, especially in a time of unpredictability. Financial planning typically involves setting financial goals and building strategies to achieve them. However, life can be unpredictable, and the untimely death of a family member can not only jeopardize those financial goals but can also leave a family without the necessary resources to maintain their current standard of living. This is where term life insurance can come in handy as it provides financial protection for your family in the event of your untimely death.

Term life insurance is a type of life insurance that provides death coverage to the policyholder’s nominee or family for a specific period. If the policyholder dies during the policy term, the insurance amount is paid as a lump sum to the nominee. Unlike traditional, money-back or market-linked life insurance policies, term insurance plans do not provide maturity benefits. Let’s take a look at the main benefits of term insurance:

The premium for term life insurance plans is very low in comparison to other types of life insurance plans. The cost of the premiums can even be as low as 0.1%of the total sum insured. In comparison, people pay about 2% of a car’s present value as its premium. Additionally, online service providers can give an extra discount on term insurance premiums compared to offline channels.

A term plan offers significantly higher coverage compared to traditional life insurance plans. For the same amount of premiums paid, a term life insurance plan will most likely offer a sum assured that is many times higher than the sum assured in a regular life insurance plan. This higher coverage is very important in helping take care of your family’s financial needs in the unfortunate event of your demise.

Besides securing your family’s future, term insurance also offers tax benefits. Under section 80C, you can claim a deduction of up to Rs 1.5 for certain investments and expenses, including the premium amount you pay towards the term life insurance plan. You can also claim deductions up to Rs 25,000 for the premium paid towards critical illness riders under section 80D. Most importantly, the payout from a term life insurance policy is entirely exempt from taxes under Section 10 (10D).

Premiums for a term insurance plan are locked for the whole duration of the plan. By buying a term insurance plan early when premiums are lower, you can enjoy this benefit. For example, if you buy a term plan at the age of 30, you would pay a premium of about Rs 10,000 every year for a sum assured of Rs 1 crore till the age of 75. That is, you would pay Rs 4.5 lakh in total. However, if you buy the same plan at 45, you would be paying a higher yearly premium in comparison, which would increase the cost of your insurance plan.

Term insurance plans are highly flexible, as they allow you to choose the policy term that suits your needs. You can select a term of anywhere from 5 years to 40 years or more, depending on your specific requirements. This flexibility allows you to customize the policy to match your financial goals.

You can enhance the coverage of your term insurance plan by adding extra riders such as critical illness or accidental death benefit riders. These riders provide additional coverage for specific events or conditions and can be added to your policy at an additional cost over the basic premiums.

The biggest benefit of term life insurance is the peace of mind it provides you and your loved ones. Knowing that your family will be financially protected in the event of your untimely death can provide a sense of security and relief. Term insurance policies are designed to provide a lump-sum payment to your nominee in the event of your death during the policy term. This payment can be used to pay off debts, meet day-to-day expenses, and support your family's lifestyle. Having term insurance in place can help ensure that your family's financial future is secure. 

In conclusion, term life insurance is a vital financial tool that provides financial protection to your loved ones in the event of your untimely death. It is affordable, easy to understand, and comes with several benefits, including tax benefits, flexibility in choosing policy tenure, and peace of mind. When considering your financial planning, it is important to factor in the potential impact of an unexpected death on your family's financial security. A term life insurance policy can help mitigate that risk and ensure that your loved ones are protected in your absence.