Term life insurance, also known as pure life cover, is a basic policy that pays the benefits if an untoward incident occurs during its duration. When the policy expires, you must pay the renewal premium for continued coverage.
The insurer considers factors like your age, health condition, lifestyle, the sum assured (SA), and gender to determine the premium. You may also need to undergo a medical checkup before your proposal is accepted.
Having understood what is term plan, here are six features of this policy that makes it a must-have life cover:
The affordability of a term plan is its key highlight. A term insurance policy provides coverage for the SA for a pre-specified duration. In case of an unfortunate event during the policy’s tenure, the insurer pays the benefits to your nominees. A regular term plan does not provide any survival or maturity benefits, which makes it easy to avail of a higher SA at an economical premium.
- Easy and quick process
Compared to other types of life insurance policies, like money-back or endowment plans, the procedure for buying a term plan is simple and fast. As the policy does not offer any maturity benefits, you do not have to understand details like returns or where the insurer will invest your money. You can use an online calculator to determine the adequate SA based on your requirements and financial goals.
You have the option of buying a term plan either online or offline. You can purchase an online term insurance policy directly from the insurer’s website with a few clicks. There is no need to submit any documents, making the entire procedure hassle-free. Additionally, the insurance company is able to reduce its overheads and save commissions, which decreases its costs. This allows you to avail of an online term insurance policy at a lesser premium when compared to an offline policy.
- Flexibility in the payout of the policy benefits
A term insurance policy pays the benefits to your nominees in your absence during its duration. Your nominees may receive the benefits lump sum or in a staggered manner. Your family members may not be able to manage a huge single payout, as they may not have the financial expertise. Therefore, you can opt for a staggered payout, which makes it easier for them to manage the money.
In this option, your nominees will receive a partial amount as a lump sum. They will get the balance amount in periodic installments over a pre-specified period. This allows them to repay any outstanding debts using the lump sum, and the regular installment ensures that they can sustain their lifestyle and meet monthly expenses.
- Tax deductions
The term insurance tax benefits are another salient feature of such policies. An amount of up to INR 1.5 lakh is exempt from tax under Section 80C of the Income Tax Act, 1961. Section 80C benefits are available for cover availed for self, your spouse, and children. Additionally, the policy benefits received by your nominees are tax-free under section 10(10D) of the Act.
- Additional coverage
Most term insurers give you the facility of increasing the coverage through additional riders. Some of these include a waiver of premium, accidental death, critical illness, and disability riders. You can add these riders to your base policy by paying an extra premium for more comprehensive coverage. However, consider your family’s needs before including the riders to ensure that you can pay the premium without financial difficulties.
- Versatile premium paying options
You can pay the term insurance premium annually, bi-annually, quarterly, or monthly as per your monetary condition. Several insurers offer single premium or limited premium options.
Protecting your loved ones in your sudden absence is important to make sure that they do not face any economic distress. A term plan is the most reasonable option to maximize your family’s financial security.