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 let 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.
Reasons to buy term plans
There could be many reasons to buy a term plan, but the 3 most compelling reasons
to buy a term plan could be as follows -
How much term insurance do I need?
-
You 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 have
taken 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
Term plans provide you a very high sum assured in 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, these plans are the cheapest.
Lower tenure 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 the various 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 is never revised or changed till
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 continue but of course with
limited life cover. Normally, the sum assured reduces with the proportion of premiums
paid till 'paid up' status of the policy.
Starting early benefits
Like other insurance plans, the premium on the term plan depends on your age and
the term of the plan. If taken at an early age, the premiums are very low.
Income Tax Benefits
You can avail a tax benefit on the premiums paid for the term plans up to 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.
Conclusion
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.