Term Insurance Benefits

What matters most is what lasts the longest - and families are forever. You weave countless dreams for your loved ones, you make sure their goals are prioritised first. But life is utterly unpredictable. An untimely death can jeopardise all these goals and threaten your family’s financial stability. That is where a Term Plan plays a crucial role. It secures your family financially in your absence so you can live a stress-free life, knowing that there will be enough to take care of them.

But before investing in a term insurance plan, assess the many benefits you would receive and see if they align with your own needs. Only then will the decision of buying a term plan be meaningful.

What Are The Benefits Of Term Insurance?

Here's a list of important benefits of term life insurance.

It Provides Financial Security to your Loved ones

The main purpose of a term insurance policy is to offer financial protection to your dependents, i.e., those who depend on your income for their living. It pays a fixed sum of money to your family if you pass away during the plan's tenure. This money can help cover your family's regular expenses, any loans you may have taken, etc.

Fixed premiums for the entire policy tenure

When you purchase a term plan against a certain premium, you are effectively locking the premium till the end of the plan. This gives you the certainty that the life cover will continue at the same cost - no matter what age and stage of life you are in.

It is Highly Affordable

A term insurance plan is the simplest form of life insurance, offering premiums that will be within your budget. Affordable premiums allow you to choose a cover that will be sufficient for your family even after many years - despite the rising living costs.

For instance, a Rs. 1 Crore term cover may cost as low as Rs. 900 per month. This means, for every rupee you invest, your family will get nearly Rs. 1000 back, in case you pass away during the policy term.

Please note: While deciding the cover amount, do factor in your family’s lifestyle, regular expenses, and future goals.

3-year Claim Payout Guarantee

If your term insurance policy has been in force for 3 years continuously, an insurance company cannot deny any claim on grounds of either -

Fraud

Misstatement, or

Suppression of facts

This is as per Section 45 of the Insurance Act. So, as long as you pay your premiums on time, the insurance act will ensure you have the certainty that your family will receive the guaranteed claim amount - once the policy completes 3 continuous years of renewals.

Covers all kinds of deaths globally - except suicide

Term insurance covers deaths globally that might fall under accidental, illness-related, natural causes, etc. Of course, you would know by now, but the only exception is death due to suicide in the first year of buying the policy. In this situation, all the premiums (minus the taxes) you have paid in the first year - will be paid back to your nominee.

If there are any more exceptions, the insurance company needs to clearly specify them in the policy wordings. Unless anything is explicitly mentioned, you do not have to assume any exception to this rule.

Tax benefits**

Term plans also provide income tax benefits- one in the form of a deduction and the other is complete tax exemption.

Under Section 80C of the Income Tax Act 1961, you can avail tax deduction on the premiums paid up to Rs. 150,000 per annum.

Under Section 10 (10D)* of the Income Tax Act 1961, the death benefit paid to your nominee (and the maturity benefit paid to you, in case of term plans with Return of Premium) are also tax-exempt- subject to conditions mentioned therein.

It is highly customisable

One of the most important term plan benefits is that it allows you to customise the policy to suit your personal preferences. You get to select -

Increasing Cover

With this feature, your term insurance cover will increase gradually by a specific percentage - until it reaches a limit specified by the insurer. Increasing cover is a great way to ensure your family is covered sufficiently throughout the plan's tenure.

Premium Payment Frequency

Based on your convenience, you can choose how often you want to make the premium payments. You can pay them -

Yearly

Half-yearly

Quarterly

Monthly

Pro tip: Always put your standing instruction on a bank account, and not on a credit/debit card. This Is because the cards come with an expiry date - during which your payment might not go through smoothly.

Claim Payout

If you pass away while the plan is active, your family will receive the Death Benefit and suddenly have a huge balance in their bank account. They may not be prepared to deal with that change. Hence, depending on your nominee's financial aptitude, you should decide if they would receive the claim amount all at once (as a lump sum), as monthly payouts, or as a lump sum with monthly payouts.

Premium Payment Model

If you want to speed up your payments with bigger instalments, while enjoying the cover for the rest of the term - go for a Limited Pay option. For example, if you think your business income can be erratic in the future, and you want to pay off the premiums while you have a stable income.

But if you prefer breaking the premium amount into smaller payments and bearing a lower cost - choose the Regular Pay option.

Riders

Riders are optional benefits that are available at a certain extra yet reasonable price. They kick in, under specific circumstances, and provide additional financial relief. Various risks - right from loss of income due to critical illness to accidental death - can be covered without any extra paperwork or medical tests.

Some common riders you can opt for include critical illness rider, accidental death benefit rider, accidental disability rider, waiver of premium rider, etc.

Why Choose Term Insurance Plans?

Considering the nature of term insurance, it will come into force when you will not be around anymore. Thus, it is an investment in the future. It has a strong and long-term impact on your family’s financial stability. Hence, it is crucial to know all the benefits and choose a policy that will cater to your family’s needs years later. A plan that will take care of them and save them from financial trouble - in your absence.

What Are The Rider Benefits of Term Insurance?

Term insurance riders enhance the coverage by offering additional benefits beyond the standard death benefit. These riders can include critical illness coverage, accidental death benefits, disability benefits, and more.

By customizing a term policy with riders, you can address specific needs such as medical expenses or disability protection, providing a comprehensive and flexible solution. Riders allow you to tailor your coverage to suit your unique circumstances, enhancing the financial security provided by term insurance.