Individual Term Insurance Plans

Life is a surprising journey; it can sometimes fill you with joy and sometimes weave a tapestry of grief. Emphasising this, have you ever wondered what will happen to your loved ones in the face of an eventuality? Well, the impact would be far-reaching and devastating, especially if you are the sole breadwinner of the family. They will have to compromise on their dreams and aspirations, their cherished lifestyle will be at risk, and they might find themselves making long-term compromises all because of the lack of financial stability.

But, there’s a remarkable solution that can provide comprehensive coverage and bring you peace of mind in such choppy waters - individual term insurance. This type of term insurance has become increasingly popular among those seeking reliable protection, as it comes with unique and flexible features. In this article, let us explore the beauty and benefits of individual term insurance plans.

What Is Individual Term Insurance?

A term insurance plan is a simple yet effective form of life insurance that provides much-needed financial support to your family in case of your demise during the policy term. It provides them with a sum of money, known as the ‘sum assured’, that helps in replacing your income and fulfilling the long-term and short-term financial needs of your family, such as day-to-day expenses, utility bills, children’s education/wedding, any outstanding loans, etc. They will receive this amount as per the payout option you choose while buying the policy.

How Does It Work?

An individual term life insurance policy or regular term insurance is a pure risk cover. It provides financial security to your family for a specific period of time, and in return, all you need to do is pay regular premiums.

Here's how it works. If something unfortunate happens to you while the policy is active, the insurance company will provide a sum of money to your nominee. However, if you outlive the policy duration, the insurer will not provide any benefits to you.

Let’s look at an example to understand individual term insurance. Irfan, 45 years old, is responsible for the well-being of his son and wife. Being the primary earner in the family, he has various financial obligations, such as day-to-day expenses, his son’s education, etc. So, he decides to purchase an individual term insurance plan to ensure that his wife and son are financially stable in his absence.

After careful consideration of his budget and the family's financial requirements, he finds out that a cover amount of Rs. 1 crore would be sufficient for them. He buys the policy for a duration of 30 years and appoints his wife as the nominee.

In case Irfan passes away during the policy term, the insurer will provide the sum assured of Rs. 1 crore to his family. This will ensure that his family is able to meet all their requirements and achieve their dreams even in his absence.

In case Irfan survives the policy period, he will not receive anything.

Term insurance can be customised to suit your and your family’s preferences as well. Here are some of the customisation options available with the policy -

➔ Claim Payout Options: Depending on your family's financial situation, you have the flexibility to decide how you want your family to receive the money. You can choose a single lump sum payment, regular monthly instalments for a specific number of years, or a combination of both.

➔ Premium Payment Duration: Individual term insurance allows you to tailor the policy based on your expected future income. If you anticipate having an unstable income in the future, you can choose to pay off the insurance premiums quickly and enjoy the coverage for the rest of the policy period using the limited pay option.

➔ Increasing Cover: If you believe that your cover amount will be inadequate in the future, there’s a helpful feature, known as increasing cover, that will automatically increase your cover amount over time. This way, you can ensure that your term insurance coverage keeps up with inflation and the changing circumstances as time progresses.

Hence, term insurance offers a wide range of options to create a personalised coverage plan that meets your family's both current and future financial needs.

Benefits Of Individual Term Insurance

Let’s take a quick look at why having a term insurance plan is one of the best financial decisions -

1. Simplest Form Of Life Insurance

Individual term insurance is the most straightforward type of life insurance. As mentioned above, its main aim is to provide a fixed sum of money to your family if you happen to pass away during the policy period. To ensure this coverage, you simply need to make sure you pay all your premiums on time.

2. Affordable Premiums

One of the benefits of individual term insurance is that it offers affordable premiums. The amount paid monthly on premium for term cover of 1 Cr is generally not heavy on the pocket. If one is planned and systematic, term insurance is a great tool to provide financial security to the family.

3. Provides Financial Protection To Your Family

With an individual term insurance policy, you can rest easy knowing that your family is financially secure against all odds if something unfortunate happens to you while the policy is active. Put simply, an individual term insurance policy ensures that, even without you, your family can maintain their lifestyle and pursue their dreams without worrying about finances.

4. Highly Customisable

As discussed above, an individual term insurance policy provides you with the opportunity to personalise it as per your specific needs and those of your family.

5. Riders

Riders are the optional add-ons that provide additional benefits in specific situations. The best part is that you can opt for these riders by paying a little extra without any additional paperwork or medical tests. Here are some of the riders available with term insurance policies -

● Critical Illness Rider
● Accidental Death Benefit Rider
● Waiver Of Premium Rider
● Accidental Disability Rider, etc.

These riders give you the flexibility to enhance your coverage and provide extra protection for you and your family in specific situations. For instance, if you opt for the Accidental Death Benefit Rider, it will give your loved ones an additional payout if you pass away because of an accident during the policy period.

6. Covers Death Globally

Another significant advantage of an individual term insurance plan is that it provides global coverage for almost all types of deaths. Except for suicide or self-harm within the first year of purchasing the policy.

7. 3-Year Claim Payout Guarantee^#

According to Section 45 of the Indian Insurance Act of 1938, if you have maintained your term insurance plan continuously for three years, the insurance company cannot reject a death claim based on fraud, misstatement, or suppression of facts. This means that once your term insurance policy completes three years, your family will receive the assured sum of money, i.e., the claim amount if you pass away during the policy period as long as you have been paying the stipulated premiums on time.

8. Dual Tax Advantages

Term insurance offers significant tax benefits* that can be availed for both the premiums paid and the claim received. These benefits are provided under different sections of the Income Tax Act of India, 1961.

➔ Under Section 80C, you can enjoy tax deductions up to Rs 1,50,000 for the premiums you pay every year for your policy.

➔ The claim amount your family receives, if you pass away during the policy period, is also exempt from tax under Section 10(10D)^.

Who Should Buy Individual Term Insurance?

Individual term insurance plans offer a wide range of benefits and are a great choice for those seeking affordable and flexible coverage. They are easy to apply for and provide quick protection, giving you peace of mind knowing your loved ones are taken care of. Term insurance is an important tool for financial planning as it can help replace lost income, pay off debts, or cover education expenses.

You should consider buying an individual term insurance policy if you have -

👉 Financial Dependents
If you have financial dependents or foresee having them in the future, it would be best to purchase an individual term insurance policy. Financial dependents such as a spouse, children, or retired parents, are those who rely on your income to meet their short-term and long-term financial needs.

👉 Insufficient Corpus for Financial Needs
If you haven't saved enough money to cover all of your family's present and future financial needs, it is essential to consider buying an individual term insurance policy. It will provide a sum of money to your family if something were to happen to you. And, they can utilise this money to meet their ongoing expenses, future goals, and aspirations, even in your absence.

👉 Outstanding Loan(s)
If you have a significant loan, such as a home loan or car loan, that could burden your family in the event of your sudden demise, purchasing an individual term insurance policy is highly essential. It can provide the necessary funds to repay those loans, relieving your family from the financial burden and allowing them to focus on their life.

👉 Unfinished Responsibilities
If you have major unfinished responsibilities, such as your children's education or weddings, individual term insurance can be your financial saviour. In the unfortunate event of your demise, the term insurance payout can be used to fulfil these responsibilities without financial constraints.

Remember, it's important to carefully assess your individual needs and compare different options available on the market to find the best term insurance plan for you.

Conclusion

Individual term insurance is a robust support system for your family’s financial needs. It provides a wide range of benefits, including affordability, customisation, tax advantages, and much more. Today, with the emergence of online insurance platforms, you can buy a term plan online from the comfort of your home by comparing various products, benefits, exclusions, etc. But, before you take the plunge, remember to read the policy T&Cs carefully and make a well-informed choice.