Term insurance is basically a form of life insurance that provides coverage for a limited period of time. The necessity of term insurance, today, rings out loud and clear. IndiaSpend estimates that a startling 75% of the Indian population do not have any form of life cover. When juxtaposed with the financial security of Indian families, this figure is an even more cause for worry. The household savings rate has dropped from a paltry 23.6% to an even lower 16.3%. This goes to show that Indians are largely unprepared for a financial emergency.
The term insurance penetration rate also remains dismal. As per a study conducted by Max Life Insurance and Kantar IMRB, only one in five urban Indians has a term insurance policy. A lack of awareness about term insurance benefits could be just one contributing factor to the low rate of penetration. In order to understand, in detail, the significance term insurance plays in our life, let us explore just some of the benefits it has to offer.
There are many benefits to having term insurance which we will discuss further in this article.
1. Financial Security
Term insurance plans offer you high coverage at affordable premiums, which is what differentiates them from permanent plans, i.e., the affordability. While permanent plans give you guaranteed returns or lifelong annuities, term plans ensure that you get a substantially large sum at a relatively low cost. This means that if you have certain liabilities (child’s college fees, mortgage payments) that need funding, term insurance returns enable in planning for these events in a financially secure manner.
2. Very affordable
One of the most distinctive term insurance benefits is that it is one of the most affordable types of life insurance products there is. Compared to whole life insurance, term insurance proves to be a whole lot easier on your pocket.
3. High Coverage
Not only are term plans extremely economical, but you can also avail a high amount of coverage. You don’t need to shell out astronomical sums of money each month as premiums to avail comprehensive coverage. For instance, the Bajaj Allianz Term Insurance plan, available on Finserv MARKETS, offers a large sum assured of Rs. 1 crore at nominal premiums of just Rs. 13 a day.
4. More Flexible
Depending on the insurance provider and plan you go in for, you can choose anything between a 1-year and a 30-year plan, with many companies even offering longer durations. Depending on your financial needs, as in short term or long term, you can choose a plan accordingly.
There are three main components to a term insurance plan, i.e, coverage amount, length of term plan and premiums amount. Without a market component, term plans remain exceedingly easy to handle and can be purchased by anyone from financial novices to veteran players. Due to this, it is quite easy for individuals to shop around and compare rates and accordingly choose the plan that best suits them.
6. Survival Benefits
Most people may believe that term insurance does not have a savings component. However, certain term plans do offer policyholders survival benefits. In such cases, if the policyholder has made no claims against the policy variant or riders, the entire amount of premiums paid towards the plan will be returned to the policyholder, at the time of maturity of the plan. Such term plans can double as a long-term savings scheme, offering the dual benefits of savings and protection. The Bajaj Allianz Smart Protect Goal available on Finserv MARKETS is one such plan. You can take advantage of its ‘Return of Premium’ option and have all your premiums returned at the end of the policy term.
7. Tax benefits of term insurance
Term insurance offers the following tax benefits in India –
1. Under Section 80C, life insurance premiums up to 1.5 lakh per annum are exempt under the Income Tax Act.
2.Under Section 10(D), the payout that term plans offer on the maturity and/or death of the policyholder is fully exempt according to the Income Tax Act.
3.Deduction under Section 80D of the Income Tax Act, if you have opted for a health-related rider along with your term insurance policy (for eg: Critical Illness Rider), you can claim deductions of up to Rs. 25,000 on the premiums paid towards your policy.
You can avail such tax benefits and more by opting for the Bajaj Allianz Life Smart Protect Goal plan on Finserv MARKETS. Since the Smart Protect Goal plan offers a Critical Illness Rider (which covers up to 55 critical illnesses!), you can avail benefits under Section 80D of the ITA, along with 80C and 10(10D).
8. Riders of Term Policy
Term plans can be easily combined with various types of riders to create a package that meets the policyholders’ specific needs. For example, opting for a Waiver of Premium (WoP) allows the individual to stop paying their premiums if they are diagnosed with a critical illness or suffer dismemberment. Numerous other riders such as Critical Illness Rider, Accidental Death Benefits, Accidental Total Permanent Disability Rider, Joint Spousal Cover and much, much more!
9. Protection Against Liabilities
These days, it is common practice to take out loans to facilitate certain milestones in life, such as higher education, buying your dream home, or purchasing a vehicle. While paying off such loans would be relatively easy with your steady flow of income, in your absence, repayment could prove burdensome to your family. With a term insurance payout, your family can rest easy that any loan repayments can be easily met.
A term plan is proving to be a necessity to the lives of every Indian. The aforementioned benefits merely skim the surface of the significance of term plans and the essential role they play in our lives. You, too, can put your family’s financial safety and security first by opting for term insurance.
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