Shalini Varma works from home as a creative strategist. She is a single mother raising twins. While she tries to balance her personal and professional responsibilities, Shalini is concerned about leaving a better financial future for her children.
This comes after the sudden death of an ex-colleague last month, who has left his young family with less savings and investments. The shocking event has caused Shalini to explore various types of insurance, particularly term insurance so that her children are financially stable should anything happen to her.
She understands that planning for the future is necessary to ensure financial protection and peace of mind.
But what benefit is typically offered by pure-term insurance plans?
Term insurance offers financial coverage to beneficiaries or nominees if the insured person passes away during the policy term. Since the policy only provides pure death risk cover with no investment component, it becomes an affordable investment option for policyholders.
You can also opt for additional riders, such as critical illness cover, accidental death benefit, or disability cover, if you wish to enhance the financial safety net.
What are the benefits of term insurance?
Term life insurance comes with many advantages. Here are a few:
Affordable Premiums
Term insurance, also known as pure protection life insurance policy, provides the sum assured to your family if you die while the policy is still active. The death benefit makes it affordable.
Besides, the premiums are calculated as per your health conditions and lifestyle. Hence, it is recommended that you start investing early so as to avoid higher mortality charges or risk of death that would add to your premium rates over time.
Bigger Sum Assured
Along with affordability, life insurance term plans offer higher coverage, ensuring financial security for your family in your absence. This is because the cost of investment is tied to the life cover — the death benefit — which is the main purpose of term insurance.
Additionally, you can also increase the sum assured during key milestones, such as marriage or the birth of children. Your dependents can use the surplus funds to pay for your children’s education, repay any debts, or support any essential expenses when you are not around.
Customization
Since term insurance can be customized, you can choose the coverage according to your long-term financial goals. Additionally, you can pay the premiums monthly, semi-annually, annually, or for a limited period, depending on your budget.
More so, you can avail of the insured amount as a lump sum or as regular income — or both. If you want your loved ones to manage finances wisely after your death, go for an income replacement (regular income) term insurance plan.
While term plans cover the premature death of the policyholder, you can add riders to further improve pure risk coverage, such as critical illnesses or disabilities.
Income Tax Benefits
Tax benefits of pure protection term insurance are defined under sections 80C, 80D, and 10(10D) of the Income Tax Act, 1961. For instance, the premiums paid for term life plans are tax-deductible, up to a maximum limit of Rs. 1,50,000 under section 80C.
If you have opted for critical illness or other optional health-related riders with your term policy, you can avail of deductions up to Rs. 25,000 under section 80D.
And under section 10(10D), in case you die suddenly while your policy is still active, your family can claim the entire insurance amount can be claimed tax-free.
Optional Riders
You can also pay a nominal amount and add riders to address any critical illnesses such as heart stroke, kidney failure, or cancer.
For example, if you get diagnosed with kidney failure, you can use the insured amount to pay for regular dialysis. This way, you neither compromise on the term insurance benefits nor become financially burdened by expected medical expenses.
You can buy any of the following term plan riders from insurance companies in India:
- Accelerated Death Benefit Rider
- Total and Permanent Disability Rider
- Critical Illness Rider
- Accidental Death Benefit Rider
- Waiver of Premium Rider
- Income Benefit Rider
- Hospital Cash Rider
Should you buy a term insurance plan?
Life is uncertain. You may think your life is under control but the risk of diseases or accidents is always there. Which is why it is important to leave your loved ones with adequate finances so that they can maintain the same lifestyle even after your death. Buying a term insurance plan from an insurance provider is one way to go about it.
To take it a step further, be sure to know the premium and insured amounts along with the policy period. Make sure you have shortlisted the right insurer as per your needs.
Term insurance – A pure risk protection plan for all age groups
While many insurance companies in India offer term life insurance policies, you should purchase the one that best suits your lifestyle and financial goals. If you ask us, follow the recommendations as per your age bracket as defined below:
- If you are in your early 20s, you should buy a term life insurance plan with a higher insured amount and low premiums.
- From 25-35 years of age, your life cover should be 20 times your annual income.
- From 36-45 years, the insured amount should be 15 times your annual income.
- From 46-55 years, it should be 10 times your yearly income.
In Conclusion
Term insurance plans offer significant sums assured at low premium amounts. The entire insured amount will be given to beneficiaries or nominees in case the life assured dies during the policy term. You can customize your policy as per the frequency of premiums to be paid, the type of payout expected, and the critical health-related riders that you would choose.
Term life insurance plans also have tax benefits under sections 80C, 80D, and 10(10D). They can be tailored according to your lifestyle and financial goals. Contact Armourr Insurance Broking Private Limited if you need help selecting a term insurance plan.
