Term Life Insurance plans in India are the most basic, effective and important Insurance Plan for an individual. Term Insurance Plans are basically protection plans and designed to protect your family against unforeseen circumstances by providing them financial security. It is the most recommended Life Insurance Plan by financial planners, Insurance Industry experts and renowned Life Insurance Advisors as securing the future of one’s family is the most important goal of life.
Now Let us see what the benefits of a Term Insurance Plan are and why it is so highly recommended.
What are the benefits of a Term Insurance Plan
Term Insurance Plans allows you to have the highest death benefit or life cover in lieu of a very low premium. This is possible because unlike other insurance plans, it is pure death protection plan with no ancillary benefits attached to it. If you compare the premiums of any traditional plan with that of term insurance plan, you will find that the term insurance plan premiums are the cheapest.
Term Insurance Plans can be taken for shorter tenure also. For example – you are aged 30 and have taken a home loan for 50 Lakhs for 15 years. In that case, you can take a term insurance plan of 50 Lakhs for 15 years tenure. This is just to ensure that during the loan period if something happens to you, your family will be able to repay the loan and retain the house.
Benefits of starting early
The premium of term plan depend on your age and the term. If the age is lower and the policy term is high, the premium will be the lowest. Therefore, one should take a term plan at an early age of their working career.
Income Tax Benefits
The policy holders can avail a tax rebate on the premiums paid upto
र150,000 per annum under Section 80C of the Income Tax Act 1961. The maturity benefits paid (in case of term plans with return of premium) is also tax free under Section 10 (10D) of the income Tax Act 1961.
Further, the claim amount received by the nominee, in case of policy holder’s death is also tax free in the hand of the recipient.
Term plans can be taken for a long period of time. Generally the term plans can be taken upto the age of 70, some companies allow taking the life cover upto 75 years of age. With growing life expectancy rate in India, it make sense to take life cover till age 75 through a term insurance plan.
Once the Insurance Company accepts your policy against a certain premium, it will never revise or change the premium during the policy tenure even if you survive till end of the policy term.
Peace of mind
Our responsibilities keep increasing as and when we start our career, get married and have children. The utmost important things in life are protecting the family from unseen circumstances and provide them with financial security. A term plan with adequate life coverage can assure you peace of mind as you need not worry about the unforeseen circumstances that your family might have to face in future.
Continuance of policy
Sometime it so happens that we are unable to pay our premiums due to financial difficulties. In that case the term plan becomes ‘paid up’. This feature allows the policy to continue, but with limited cover. Normally the life cover reduces with the proportion of premium paid till ‘paid up’ status of the policy.
Now that we have known the benefits of a Term life Insurance Plan, let us see what is the various types of Term Insurance Plans available in India.
Type of Term Insurance Plans
Level Term Plans
This is the simplest form of Term Insurance Plan where the sum assured do not change during the tenure and benefits are paid out to the nominee on the death of the policy holder.
Return of Premium Plans
Unlike level term plans, here the plans have maturity benefit, wherein the premiums are returned to the policy holder if he or she survives till maturity of the policy.
Increasing Term Plans
In this plan, One can opt to increase the sum assured at annual frequency during the plan period while keeping the premiums same. Of course, the premiums of this plan will be different than that of level term plans.
Decreasing Term Plans
The opposite of increasing term plan is the decreasing term plan. Here the sum assured decreases year after year so as to match the decreasing insurance needs of the policy holders. These plans are mostly taken when someone has taken a large home loan or personal loan and paying an EMI. The sum assured decreases with a chosen frequency as and when the EMIs are paid out and the total loan amount keeps decreasing.
Convertible Term Plans
This is a plan offered by some of the Insurance companies wherein a term insurance plan can be taken with an option to convert it into some other plan of your choice at a future date.
For example: You have taken a term plan for 25 years but after 5 years you can covert this into a whole life insurance plan, endowment plan or any other plan of your choice, if you so wish.
Term Plans with Riders
This is a unique plan whereby you can buy riders like, critical illness cover, accidental death cover or disability cover etc. by paying a small additional premium. If you take a rider and opt for premium waiver benefit, then you need not pay the future premiums in case of any eventualities for which you have taken the rider.
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