How Do Term Plans Assist You In Securing The Financial Future Of Your Family?
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A term insurance policy is a godsend in a world where possibilities are endless, and so are uncertainties. A life insurance policy is a pertinent investment you need to make to ensure well-protected you and your family. The advantages of term insurance plans continue even after the policyholder’s untimely demise. In such a case, the policyholder’s family members will receive monetary aid as promised by the insurance company so that they can continue to live their lives in a manner they are accustomed to. The duration of such policies can range from anywhere between five to forty years, depending on several factors of the policyholder such as age, budget, etc. It is an affordable way to maintain the goals of your loved ones in case of your death, a term insurance plan is practically a mandatory investment.
What is a Term Insurance Policy?
Typically, a term insurance plan is a type of protective life cover that provides coverage to the insured person for a stipulated period of time. In a scenario where the insured person passes away unexpectedly during the active policy period, the nominee or beneficiary will receive the sum insured amount. This is a sure way of ensuring that your family members remain protected financially in case of your death. Unlike many other traditional insurance plans and endowment plans, a term insurance policy does not have the options of investment, which means that the insurer will only pay the beneficiary or nominee in case of the policyholder's expiry.
Features Of A Term Insurance Policy
Some of the key features of term insurance policies that you might not be aware of are:
- This is a cost-effective plan
- These types of policies do not give the option of investment
- You only need to pay the policy premium until your retirement
- In addition to the lump sum amount, you can choose to receive payouts in monthly installments, which adds to your income
- The assured sum shall be paid to the insured in case of death of the policyholder
Benefits of a Term Insurance Policy
A few advantages of term insurance policies are;
1. Financial Security
Term policies financially secure the future of the policyholder's family members via payment benefits that they pay to them in case of the policyholder's death. Dependants of the policyholder such as children, partner, parents, and even siblings would be free of financial burdens caused to them due to the breadwinner's demise. The family members can use this amount for their expenses such as children's education, hospitalization needs, funeral costs, etc. Newlyweds, new parents, businessmen, and any other individuals with high financial responsibilities can benefit from term plans.
2. Low Premiums
Among the most affordable types of insurance available in the country, term insurance policies offer similar coverage amounts as regular traditional life insurance plans but at a fraction of the premium payments required. Due to low tenures, which are only extendable through periodic renewals, lower premium payments are calculated.
3. Coverage of Additional Illnesses and Risks
Optional riders like critical illness riders and accidental riders are offered along with term insurance plans you can opt for if you want further coverage. This small amount can go a long way for policyholders as they cover costs of medical expenses in case of accidental impairments and critical illnesses. In addition to these, you can also increase your policy coverage on important occasions in life, such as the birth of a child, a wedding, etc.
4. Death Benefits
The flexibility to choose the death benefit from numerous options is offered with term insurance plans. Usually, the sum assured is paid out as a lump sum to the beneficiary in case of the policyholder's death, but you also have the option of taking this amount in installments, as offered and agreed upon at the time of inception of said policy. This can act as an income for those who need it and further help achieve life goals and protect assets, among other expenses.
5. Cover for Long Term
The earlier you purchase, the more the policy becomes beneficial to those who want to extend their life cover to 99 years. This can be taken if the premium payments are made for a limited time period.
6. Tax Exemptions
All premiums paid on term insurance plans are exempted from tax payments under Section 80C of the Income Tax Act. While the primary purpose of such insurance plans are to safeguard the financial interests of the policyholder's family members, the tax exemptions come as a welcome option of money-saving. In addition to this, the death benefit received at the time of the policyholder's death is also exempt from tax, so the beneficiary will get the full amount as assured. This is a great benefit but subject to timely payments of premiums and timely renewals. Lapsed policies shall not be entertained with any benefits, should the person fail to pay so even within the given grace period.
7. Ease of Purchase
Completely eliminating the third-party agent such as a broker, you can now choose, calculate premium payment amounts, pay premiums, renew policies, and purchase policies online. This is easier, quicker, and quite often, more lucrative as many insurance companies prefer this mode of communication and, to encourage it, offer additional discounts and perks.
Conclusion
To get the most out of your term insurance policies, it is imperative to choose the right policy that you will adhere to and offer the optimum benefits for your family members. Furthermore, while providing umpteen benefits, a term insurance policy is subject to a good credit score and complete honesty from your end. Illegal practices and fraud is a strict no-no, and you could lose all you have gained. Purchase a policy that is the most beneficial to you in the long run and enjoy the benefits at retirement as well.
Also read- In 2022, There Is An Investment Option That Will Help You Save Money On Taxes
