One of the harsh realities of life is its unpredictable nature. No matter how well we plan to live the life of our dreams, an untoward incident like a sudden illness, accident, disability or even death can not only affect us personally but also our family. Sudden loss of the family’s breadwinner cannot just have an emotional impact, but also a financial one that would become difficult for the family members to cope up with. At such times, buying a term insurance plan can turn out to be a savior as it helps you provide quick financial protection to your family. Read on to know the reasons why you should buy a term insurance plan now.
What is term insurance?
In simple terms, a term insurance plan is a type of life insurance plan that offers financial coverage to the policyholder for a specific tenure within which if he dies then the nominee becomes eligible to receive the sum assured. However, if the policyholder outlives the term, then the premium paid till date is not paid back. Under this type of life insurance plan, the premium is less whereas the sum assured offered is pretty high. For instance, a term insurance policy of Rs. 1 crore for a 25-year-old, non-smoking male will cost a premium of just Rs. 8, 364/ year.
Reasons you should buy a term insurance plan
Provides financial security: A term plan is not an investment plan but an insurance plan that helps you build a strong financial cover for your family even after your death. In case of any unfortunate event i.e. your death or disability, the family member i.e. the nominee you name receives a lump sum amount that can be used to take care of their daily expenses as well as pay off your loans. Depending on the growing needs of the family, you can revise the coverage amount. For instance, if at the age of 30 you marry and at the age of 34 you plan for a child, then depending on your life’s phase and your growing responsibilities, you can choose to increase the coverage amount.
Low premium rates: Another reason you should opt for a term plan is that in comparison to other types of life plans, it is an affordable one. For instance, for a 30-year old individual, a 1 crore term insurance plan for 30 would cost a premium of Rs. 10,000 per year. Also, the premium for this type of plan stays the same throughout the tenure of the plan, irrespective of your age.
Highly flexible: Term insurance plan can be purchased both online or offline depending on your preference. You don’t need to undergo a health-check for coverage amount that is less than 50 lakh and can also customize the plan as per your growing needs. Going ahead, you can also change your nominee anytime.
Low claim rejection: This type of life insurance has a low claim rejection ratio, which means that chances of claim rejection are very less unless you haven’t disclosed any serious facts related to your health conditions and lifestyle habits.
Riders: A term plan can be purchased with various riders including waiver of premium, permanent disability, critical illness rider, accidental death benefit rider, and others. This can help you provide enhanced protection to your family.
Tax benefits: This type of plan offers a tax-free death benefit to the nominee of the policyholder. Under the Income Tax Act, 1961, a policyholder too can get tax deductions up to Rs. 1.5 lakh under section 80C of the act, whereas, the beneficiary can avail exemption under Section 10(10) D for receiving any amount as part of the sum assured.
Based on the above reasons, it is very clear as to why you should buy a term insurance plan. However, you must buy the plan at a young age as it will cost you less premium and also provide protection to your family for a longer-term. Never miss out on paying the premium on time and always disclose all the facts as by doing so your beneficiary will get the benefit of a swift claim settlement process.
Viral Bhatt is the Founder of Money Mantra - a personal finance solutions firm