Imagine you are the sole bread earner in your family. Your kids, wife and your parents depend on you for their survival. What if someday, something unfortunate happens to you – Where would your family go? How at all would they survive?
The term,’ Term Life Insurance’ comes into play in moments of such crisis. To summarize, it is one of the forms of life cover in which the insured’s family, on his death, becomes the beneficiary. It aims to provide financial stability to your family or your dependents in case of your sudden demise, for a definite period of time.
Key Features Of Term Life Insurance
- Flexibility:If you wish to opt out of a Term Life Insurance policy, the procedure is much simpler than most other policies. In term policies, once the premium payment is stopped, the policy gets terminated and the risk cover ceases. Since there is no savings component in the policy, nothing is payable to the insured, unlike other policies which have a cash value where you get the sum assured only after the full tenure of the policy. Mid-term suspension of premiums leads to a financial loss, and you cannot recoup the portion that is saved without certain deductions under various terms and conditions.
- Simplicity: Like endowment policies that blend risk cover with savings, term insurance plans are much easier to understand. Plans which comprise risk cover along with a particular savings component are called cash value plans. Planning financial goals around such plans may seem tedious, since there are a lot of complications like size of your savings against the policy death benefit, etc. With term life insurance, the things become way simpler. Pay the premium and get covered for the period of time that you’ve chosen.
- Tax Benefits: While investing on an endowment type of insurance, since the premium is more, the benefits you get are even more, under the Section80C of the Income Tax Act. In addition, it also yields tax-free income once the maturity claim is paid. Term life insurance also yields tax benefits under Section 80C while involving lower premium rates. In fact, the difference in premiums of both these plans can be further utilised in other fruitful investments – such as PPF, ELSS that offer front and rear end tax breaks as the likes of an endowment plan.
- Low Premium: If you compare the premium rates of a cash value policy with that of a term insurance plan, the difference would be quite significant. For a term value policy, annual premiums are much lower compared to an endowment policy, with or without profits, for the same amount of death benefit.
Best Offers and Benefits:
Speaking about the benefits of a term life insurance policy:
- Beneficial for people who are in the market looking for a death cover insurance plan and cannot afford to avail a cash value insurance cover.
- For a person who has a meagre earning but has a large family to sustain, term life insurance plans work wonders.
- For people who are just about to begin their financial career, or maybe on the threshold of starting a new business, term insurance policies act as a cost cutting yet profitable investment. Such people can insure themselves without burning a hole in their pockets, and utilising the capital to strengthen their finance or business setup.
- Offers a quite inexpensive method of providing your domestic servants with financial security.
- Employers often resort to term insurance plans to provide life cover to their employees – especially the ones who earn daily wages. They can even claim the premiums paid on such policies as a part of their business expense.
- Buy term and invest the difference in other avenues – such theory is applicable to term value insurance plans. The benefits of paying lower premiums will ensure you use the capital for investing into other useful ventures, maybe into real estates, or some kind of business.
To ensure future insurability, term insurance plans are used. It not only provides financial stability to your dependents during your untimely absence, but also ensures you pay bare minimum amounts as monthly or annual premiums during the course of your lifetime.