9 Term Insurance Plan Benefits

Introduction

Studies have shown that uncertainty about one’s financial situation is one of the leading causes of stress in a person’s life. Term insurance is a popular financial instrument that can address these fears while securing the financial future of your loved ones.

 

One of the prime term plan benefits is that it is the most affordable life insurance product available in the market. It is also known as ‘pure life insurance’ since your entire premium goes into building your life cover which will sustain your family in your absence. But with the growing demands of modern times, additionally introduced features of term insurance offer a lot of advantages other than solely providing death benefits. Read on to understand more about this kind of policy.

Term Insurance Benefits and Drawbacks

There are several features of a term plan that make it the ideal type of life insurance for a majority of Indians. Here are some of them:

• Affordable

  Since your entire premium is utilised only for securing your life cover and no other purpose, term insurance costs are lower than almost all other types of insurance.

• High Cover

  Not only that, term plans also provide a significantly higher sum assured amount, which will truly come in handy when your family needs it the most.

• Flexibility

  Term plans can be bought for a shorter duration, like 5 or 10 years or ultra-long durations like 30 years and beyond.

• Additional Options

  Riders or Add-ons are a great way of enhancing the standard cover provided by your term plan. There are riders that, on additional payment, can provide survival benefits, return of premium, joint cover of spouses, medical cover and protection against expenses relating to several critical illnesses.

• Tax Benefits

  An additional term insurance benefit is as per the Section 80C of the Income Tax of India Act that allows for deductions upto Rs. 1.5 Lakh per annum. This means, upto the said amount, your premiums can be deducted from taxable income while filing your annual returns.

 

Like most things in life, term insurance, too, has its pros and cons. Some may call it a drawback, but in actuality, they are better termed as limitations. These are few and include:

 

• Term life insurance benefits do not support wealth creation. It is purely to support your family by providing them the sum assured upon your demise.

• A typical term insurance is not suited for people with short-term goals like going for a vacation or buying a car or a house.

• Traditional term plans only provide death benefits to the policyholder's nominees but no survival benefits.

Who is eligible to claim the particular benefit?

Let us examine the three most likely scenarios and associated beneficiaries in a term insurance policy.

 

• If we talk about the term plan tax benefits, then all policyholders who are alive and file their respective Income Tax Returns can avail the benefit under Section 80C and as stipulated within the specific terms and conditions of the Income Tax Act of India.

• A traditional term plan only offers death benefits that are payable to your nominee. In case of multiple nominees, the sum assured is split as per the percentage you declared in your policy document.

• In case you have opted for different riders to enhance your coverage then the term plan benefits will be paid accordingly. So, for example, incase of an Accidental Death Cover the benefits will be paid to nominee(s) while if you have opted for Return Of Premium, then it will be paid out to you in case of the expiration of the policy period.

Conclusion

As mentioned earlier, term insurance is the purest form of insurance. This makes it more affordable while providing high coverage amounts as compared to the different endowment-based life plans available in the market. People who want to ensure they leave behind a substantial fund for their families to be free of financial liabilities should opt for a term plan. Features of term insurance, these days, have been enhanced so that you can also get additional benefits that can act as a long term saving aside from providing insurance cover.