Benefits and Reasons to Buy Term Plan
Term plan is the most recommended Life Insurance Plan for an individual. Term Plans are the most basic form of life insurance plans. They enable you to secure your family financially, by offering a high life insurance cover against a relatively low premium. Term plans lets you keep your family financially secured and independent, in your absence. If you are the sole bread earner of your family, you can pay a specific premium amount at fixed intervals to buy this plan. In the eventuality of death during the policy tenure, your nominee gets a pre-decided amount which is called sum assured, as per the provisions of your term plan.
There could be many reasons to buy a term plan, but the 3 most compelling reasons to buy a term plancould be as follows -
- ou are the only earning member of your family and thus your family members are financially dependent on you.
- Apart from your responsibility to protect your family financially, you also havetaken home loan or personal loan or car loan or you may have other liabilities. Therefore, you need a sufficient sum assured to cover all the above liabilities.
- You want all the above covered at a very affordable cost.
Following are some of the benefits of a term plan and why it is a must have for financially protecting your family.
Lowest premium-Termplans provide you a very high sum assuredin lieu of a very low term insurance premium. Unlike other insurance plans, the term plan is a pure protection plan with no ancillary benefits attached to it and therefore, theseplans are the cheapest.
Lowertenure term plans – Terms plans can be taken for shorter tenure also. For example - you have taken a home loan of 50 Lakhs for 10 years. In that case, you can take a term plan of 50 Lakhs only for 10 years for covering the risk of home loan.
Longer tenure term plans – Term plans can be taken for a long tenure depending upon thevarious liabilities that you have owing to your family. Generally, all insurance companies offer life cover through term plan till age 70 – 75. This ensures that you are able to protect your family's financial future till very late life in your life.
Premiums are fixed– Once the life insurance company accepts your term plan against a certain premium (as per policy terms and conditions), the same isneverrevised or changedtill the policy tenure.
Continuation of policy – It may so happen that you are unable to pay premiums in time or may be forced to stop paying it due to financial difficulties. In that case, the term plan can be made 'paid up'. This feature allows the term plan to continuebut of course with limitedlife cover. Normally, the sum assuredreduces with the proportion of premiums paid till 'paid up' status of the policy.
Starting early benefits – Like other insurance plans, thepremiums on the term plandepends on your age and the term of the plan. If taken at an early age, the premiumsare very low.
Income Tax Benefits –You can avail a tax benefit on the premiums paid for the term plans upto Rs. 150,000 per annum under Section 80C of the Income Tax Act 1961. Along with the Section 80C benefits, the claim amount paid to the nominee in case of death of the policy holder is also tax free under Section 10 (10D) of the income Tax Act 1961.
Term plans are the only plan which can fully protect the financial future of your family. The term plans are must have for the sole bread earner of the family due to its inherent benefit of providing a high sum assured at a low premium added with the Income Tax Benefits. The premium paid is a small price compared to the benefits of financial protection your family get in case of your sudden death. You must assess the various financial liabilities that might arise in case of your death as you are the sole bread earner of your family and thus you must choose a right term plan for you.