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Is Term Insurance Worth It?

By Finserv MARKETS - Mar 12,2020
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How long is term life insurance good for?

Life insurance is an important financial product, aimed at providing cover for individuals and their loved ones. One of the most popular types of insurance is term insurance. But is term life insurance good, and what are the advantages of getting term insurance?

Term Insurance and its Advantages

If you are wondering how long is term life insurance good for, it helps to know that it is an insurance policy where you can choose a term, ie, a time frame for insurance coverage. In the unfortunate event of the insured person’s demise during the term, the lump sum benefit is paid to the nominee.

  • Inherent simplicity

One of the biggest benefits of term insurance is the simplicity inherent in its structure. Whole life insurance or endowment policies have both the savings and coverage options. They have a cash value aspect which may not always be easy for the layperson interested in getting adequate coverage. If you get those plans, you may have to work your way through complicated calculations on how much premium goes into the insurance coverage and how much is being invested as savings. Financial goal planning can get difficult. On the other hand, term insurance is a simple, easy-to-understand policy, where all you do is pay premium and seek life insurance coverage for the term you have opted. So, the answer to the question is term insurance good is a positive one — the sheer simplicity of such a policy makes it an attractive option.

  • Affordability

Premiums for a term insurance policy are affordable and inexpensive unlike whole life policies. The benefit in comparison is enormous. For a low premium, you can ensure that your family is covered. Peace of mind is an intangible but significant benefit. When a family loses a breadwinner, the emotional trauma is huge and the dependents may not have the mental or financial strength to cope with the burden. A small premium can ensure that you avoid that. You can calculate premium amount online instantly using online term insurance premium calculators.

  • Flexibility

If you ever wish to opt out of your term insurance policy, all you need to do is stop paying your premiums. The coverage automatically comes to an end, and there’s nothing that’s payable. On the other hand, if you were to use a policy where the savings component is involved, it makes things complicated. Most term insurance policies can be renewed.

  • Riders

If the question is term insurance good still bothers, think about the riders that it comes with. These riders are add-on benefits that enhance the value of your insurance coverage. Take the accidental death benefit rider, where the nominee gets an additional benefit if the insured meets with an accident. The critical illness benefit rider is another example where the insured gets health care coverage for some critical illnesses such as cancer. The term policy available on Finserv MARKETS, comes with all of these riders. It also offers numerous perks and benefits such as waiver of premium benefit or return of premium benefit, so pick the appropriate riders to suit your circumstances.

  • Tax exemption

Added to the benefit of low premiums is a further exemption on premiums under Sec 80 C of the Income Tax Act. This way, your term insurance policy becomes more affordable.

How long is term life insurance good for?

(Source: ibtimes.com*)

Term insurance uses

  • Is term life insurance good? It is, if you are someone who is on a tight budget; cash value policies are more expensive.
  • Term insurance is also good if you have a low income source but have a large family or dependents and need to secure their future.
  • If you are starting your career or about to launch a new business, you may also benefit from term insurance as it is affordable. They can channelize their capital for business or for other professional growth-related activities.
  • If you have opted for a housing loan or vehicle loan, it is appropriate that you take term insurance because it is cheaper and you have more leeway to use the money you saved on insurance on repaying your loans — this way, you have insurance cover and also the opportunity to repay loans. Other forms of insurance are more expensive and may eat into your savings by way of high premiums.

Here’s an illustration that helps you understand the benefit of term insurance

Rahul is a 27-year-old software professional, whose parents are dependent on him. Added to it, he is newly married as well. He is able to save Rs 15,000 per month and may need an insurance cover of Rs 50 lakh. He has been recommended a term insurance cover where the premium is Rs 10,000 per year, and the term for which it needs to be paid is 30 years. Is term insurance a good choice? For Rahul, it may seem like he won’t be able to get anything out of it in terms of ‘returns’. But consider the term insurance benefits He needs solid coverage in the unfortunate event of his death, and he gets it. He is young and may not realise that life can be uncertain. Also, the premium he pays through the year amounts to just under Rs 30, a pittance considering the peace of mind he receives in return. Even if he has to pay for 30 years, the overall payment will be just over Rs 3 lakh which even if he were to get back at that point in time, hardly adds up to anything at all, considering inflationary tendencies.

Limitations of term insurance

  • Insurance is good but is term life insurance good under all circumstances? One of the limitations is that the premium is not a constant like in a cash-value policy. In a term insurance policy, premium tends to increase as you age.
  • How long is term life insurance good for? It is good till you have coverage but you should note that term insurance policies are hard to buy if you have crossed 65. Typically, insurers don’t offer term insurance policies beyond that age.
  • Also, term insurance is not useful if you want to save money for life goals such as marriage and education of children or your retirement.
  • Term policies also don’t come with the option of loans or surrender values and you don’t have a savings component.

Avoid these five mistakes while buying term insurance

  • Buying inadequate cover: You can use a simple online term insurance calculator or take professional advice and get the cover you actually need, and not opt for an insufficient cover, which may not add up to much if your family needs it. The rule of thumb should be ten times your annual income.
  • Opting for a short term: You may seek to save money on premium payment but as you age, and opt for fresh insurance cover, the costs only increase.
  • Inadequate or wrong information: This is counterproductive as it may affect claims settlement and your policy may be declared null.
  • Delay in buying insurance: When you are young, you may feel you don’t need term insurance because you have no dependents or you are single, but as you age, your commitments may increase alongside financial burdens as well. It is best to get insurance without any delays.
  • Buying too many riders: Riders are good but you should assess your needs and pick the appropriate ones rather than randomly buy everything and bear the excessive financial burden as a result. If you have a medical history of critical illness in your family, you should buy a critical illness cover. Assessing your needs is paramount.

In conclusion, it is ideal that you research your life goals, financial situation, and commitments before opting for term insurance. Go for the Bajaj Allianz Smart Protect Goal Term Plan on Finserv MARKETS and enjoy the numerous benefits it provides policyholders. You can benefit from high coverage at an affordable premium and save tax as well.

Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522