Is Term Insurance A Must For Everyone To Buy?

There are several types of term insurance plans available in the market, each varying in the benefits it provides and how much it costs. Term insurance is a particular type of insurance which is popular for being one of the most affordable plans that provides protection to your loved ones, especially in times of an unforeseen event. The defining feature of term insurance policies is that they offer coverage for a specified number of years. In case the insured passes away before the expiry of the tenure of a term insurance plan, then his nominees/beneficiaries will be provided with a Death Benefit or sum assured. However, if the insured survives the policy term, then no payout is made.

Reasons Why You Should Have Term Insurance

Term insurance policies have a number of benefits, which make them an ideal insurance option. Read on to find out more about how a term insurance policy can benefit you.

1. Competitive Pricing

When it comes to term insurance policies, they are easily comparable, primarily on the basis of price. In terms of their structure and operation, term insurance policies are essentially similar, which allows one to compare between different policies with greater ease. This simple basis of distinguishing policies, along with the ease of understanding, has led to the competitive pricing of term insurance policies, which are fast attaining the status of a commodity. There are far lesser issues in terms of information for term policies, which has further helped in the competitive pricing of these policies.

2. Simple To Understand

While other insurance plans such as Endowment policies may be a little complicated to understand, term insurance plans are far simpler to comprehend. While there are several aspects involved in insurance plans such as the saving component, calculation of risk, size of cash value savings, death benefit, policy loan repayments, etc. As compared to all this, term term insurance is very simple as it only asks you the term for which you wish to be covered, for which you are asked to pay the premium. That's all that is involved.

3. Option To Renew

This is a very helpful option included in term insurance policies which allows policy holders to continue their insurance cover. If your policy is renewable, then you do not have to undergo or submit a medical test at the end of the first complete term of your policy.

4. Flexibility

As compared to a cash value policy, it is far easier to opt out of a term insurance policy. It is quite simple for term policies where once the insured stops the payment of premium, the risk cover provided by the policy also ceases and the policy is no longer applicable. Considering that there is no savings component in term insurance policies, you will not receive any payout. On the other hand, under cash value policies, you will only receive the complete promised survival benefit if you have continued the policy till it reached the end of its term. If you have ceased the premium payment of your cash value policy before the end of its term, it will be a greater loss since you won’t be able to recover the savings you have earned under the policy without deductions.

5. Option to Convert

Another important feature often offered under term insurance plans is the option to convert. Policy holders are allowed to convert their term insurance policy into another policy such as an endowment policy, depending on the change in conditions. Conversion of a term insurance policy will be done considering restrictions such as time duration, cost of conversion, amount to be converted, etc.

6. Affordable Coverage

As already mentioned above, term insurance plans are considered to be one of the most affordable types of insurance plans available. Premiums for term insurance policies are considerably lower than those charged by cash value policies. Not only are term insurance plans simple to understand, they are also one of the most affordable plans which offer premium returns. Policyholders can fix the amount of monthly premium which they can pay based on their budget and the insurer will calculate the death benefit based on the premium. For instance, a 30 year old individual can currently purchase a term insurance policy for a duration of 20 years for a sum assured amount of Rs 10 lakh by making an annual premium payment of Rs 3000. Compare the same with an endowment policy which does not provide any profit and offers the same amount of sum assured, the annual premium for which will not be below Rs 30,000 or Rs 50,000 in case it is an endowment policy with profits.

7. Tax Benefit

Like several other insurance plans, term insurance plans also offer tax related benefits on the death benefit which is payable to the nominees appointed by the insured. The logic behind this arrangement is that a policyholder pays the policy premiums with money which has already been taxed by the government. Therefore, the benefit amount which you receive is not taxable. Premium payments made under term insurance policies are eligible for tax benefits under Section 80C of the Income Tax Act.

8. No Mystery Surrounding Returns

Another reason why investing in a term insurance plan is beneficial is that there is no mystery surrounding the returns that you will receive. Once you have begun investing in a term insurance plan, you can easily determine the exact amount of returns that you will receive, due to which, the risk factor is considerably lowered. It is because of this reason that term term insurance remains to be one of the most popular types of investment in India.

9. Timely Payouts

If you compare between the several types of term insurance plans that are currently sold in India, term insurance plans are the ones which provide the fastest payouts among all others. This is one of the most important benefits which have made term insurance plans so popular, mainly because of the simple terms of the policy. When a claim is made, the insurer will be obliged to make the payment as soon as possible without much debate.

10. Additional Benefits

A majority of term insurance policies offer living benefits, in addition to the Death Benefit. Usually available in the form of a rider, living benefits have considerable weightage on the returns paid by term insurance policies.

Conclusion

With the term insurance sector going increasingly competitive, more and more players are entering the industry with affordable plans. This has helped make information regarding term insurance easily available to individuals with greater ease. Also, many insurance providers are providing prospective policy takers with quotes in term insurance plans to encourage them to make a purchase.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.