Reasons Why Term Insurance is Must Buy

With the increasing number of critical illnesses, inflation, and a fast-paced lifestyle, investing in a term insurance plan is the initial step toward financial planning. One of the most popular investment products, term insurance, is a pure life insurance plan that enables the insured to ensure the financial security of their loved ones and family in the unfortunate event of their demise. 

A term insurance policy is a contract between the insured and the insurance provider where a pre-determined amount is paid in the event of the insured's death. In return, the insured pays a fixed premium amount. A term insurance policy with adequate coverage can help your dependents overcome any financial obstacles in the future. In this article, we will talk about the main reasons why term insurance is a must-buy and is more popular than other investment products.

What is Term Insurance?

Term insurance is a life insurance plan in which the insured individual pays a fixed premium amount at regular intervals (quarterly, bi-annually, or annually), and the insurance provider agrees to pay the nominees the sum assured in the event of the premature death of the beneficiary during the policy term. Their loved ones can utilise this amount to manage their financial obligations, such as debt payments, school fees, and loans.

But, if the insured survives the term of the policy, he will not receive the survival or maturity benefits of the term insurance policy. However, in recent times, some insurance companies are offering term plans that pay back a certain percentage of the total premium paid, even if the insured survives the tenure. There is also an option where you can go for term insurance plans with "return of premium", where all the premiums paid throughout the policy term are returned at its end. The policyholders can use this maturity benefit to fulfil their goals such as house purchase, wedding, education and so on. 

Additionally, you can also buy a term insurance plan with a 100% premium refund at no cost. In this plan variant, you can exit from the plan at a specified age and get all premiums paid during the policy termination. You can utilise this premium refund to secure your retirement period and remain financially independent.

6 Reasons Why Term Insurance is a Must-buy

• Financial Safety

Term insurance plans offer the death benefit to the nominee or the policyholder's family upon their unexpected demise during the policy term. Your family can avail of this benefit to help tide them through any distressing time. They can use the payout amount to fulfil their financial obligations that arise after the death of the family breadwinner. Term insurance plans provide a financial safety net for your loved ones, even in your absence. 

• Affordable premium with higher coverage

You can buy a term insurance policy with a huge life cover and a long tenure at a low monthly premium cost. Moreover, you can choose to pay the premium amounts in regular intervals for the full term, in limited premium amounts, or the entire amount in one go in a single payment. You can select a suitable payment frequency such as monthly, annually, semi-annually or quarterly for both the limited and regular payment modes. 

Since term insurance plans come with low premiums, it is an ideal option for individuals who cannot afford expensive insurance plans but need coverage for their loved ones. Additionally, if you are young and healthy, a term insurance plan comes at an even lower cost as you come under the low-risk customer category. Hence, term insurance premiums will be lower if you buy it when early in life.

By offering a higher sum assured than traditional insurance policies, term insurance plans ensure that the insured's family do not undergo any financial hardships in his absence. Term insurance plans are sufficient to handle all the financial responsibilities of the insured's dependents without any bindings.

• Long-term Cover

Most term insurance plans offer coverage from 5 to 60 years. You can choose the term insurance with coverage for 30 years, pursue your professional life by paying nominal premiums and have a financial cushion post-retirement. If you wish to ensure your family's financial security for an even longer time, you can purchase a whole life insurance policy that offers coverage for one's entire lifespan, that is, till 99-100 years. When you purchase your term insurance policy early in your life, you can get coverage for the maximum possible time. 

• Can increase Coverage

Term insurance plans have riders or add-on covers that enable policyholders to increase the coverage of the policy by paying extra premiums. Ideally, you can choose to increase coverage when you are younger and have financial support. Most common term insurance riders offered include critical illness rider, accidental death benefit rider, premium waiver rider and so on.

• Simple and Flexible

Term life insurance plans are simple, flexible, and hassle-free in terms of premium, benefits, coverage and claim settlement. The following features of term insurance plans make them a simple and effective choice for investors:

• When you buy a term insurance policy offline or online, you have the power to alter the policy type or even drop it without having to pay any penalty. 
• The benefit that the insured is entitled to post-policy maturity is a certain percentage more than the total premium amount paid.
• Among all life insurance plans available in India, term insurance plans were found to offer the quickest payout of claims due to their simple structure and no reason for debate.
• Apart from the death benefits, term insurance plans offer living benefits as well in the form of return of premium.
• Buyers have access to free quotes of varied term insurance plans to compare and choose from. 
• The convertibility feature of term insurance plans offers the flexibility to investors to extend or reduce the policy offering depending upon the changing situations.
• Most term insurance plans can be bought online by filling in some basic details. You can compare various plans online, customize them as per your needs and choose the best one. 
•  Online term insurance policies can give your nominees a quicker and simpler claim settlement as they can submit the claim form and all related documents online.
• With term insurance plans, companies do not insist on health checks if the coverage amount is less than Rs. 50 lakhs.
•  Tax Benefits

You can claim tax benefits on the premiums paid for term insurance plans under Section 80C, including premiums paid towards the critical illness benefit under Section 80D. Moreover, the lumpsum sum assured amount received by the nominees is also exempted from tax deduction under Section 10D of the Income Tax Act. 

Conclusion

A term insurance plan is a vital financial instrument that can help secure your loved ones during contingencies. But, before buying a term insurance plan, you must remember to choose rightly the coverage needed, the correct policy term, and the right add-ons. You must research the insurance company and their claim settlement ratio to ensure that your family can enjoy the maximum benefits of the term insurance policy.

FAQs

1. What are the factors to keep in mind while buying a term insurance plan?

• Age
• Financial position
• Family's future financial needs
• Basic expenses
• Loans and debts
• Inflation and increasing costs
• How many years are term insurance plans offered for?

Typically, term insurance plans offer coverage between 5 to 40 years. One must choose the plan based on their retirement age.

• Can an individual buy 2 term insurance plans?

Yes, one can buy 2 term insurance plans, but he must be aware of the terms and conditions of both clearly.

• Can a term insurance plan be rejected?

Yes. A term insurance plan application or claim settlement can be rejected if any of the personal information submitted is incomplete, false, or hidden.

• Who are generally eligible to buy term insurance plans?

Typically, salaried or self-employed professionals are eligible to hold term insurance plans, but some providers also allow small businesses and housewives to purchase term insurance.