Term Life Insurance

A suicide bomber’s blast ended more than 100 lives in the northwestern Pakistani city of Peshawar, devastating a mosque in a supposedly secure sector of the city, and sending smoke plumes into the sky and panic through the streets.

What is Term Insurance?

Term insurance is a type of life insurance that provides life cover to the policyholder and his/her family in exchange for regular premium payment for a fixed number of years i.e., the policy term.

Who Should Buy Term Life Insurance?

Below are the individuals who can buy term life insurance plans in India easily:

  • Parents: Parents are generally the single breadwinner of the family and the only financial support for their children. Thus the best way to secure the financial future of your children is to have a term life insurance policy. During the policy term, a death benefit is paid to the beneficiary of the term insurance policy in case of the unfortunate demise of the insured person i.e. parents.

  • Young Professionals: If you are a young professional who has recently started working, then you must buy term plan early. The younger the age of the policyholder, the lower the term insurance premium will be. Similarly, the older your age is, the higher will be the premium.

  • Newly Married: A term insurance plan works as a financial safety net for your spouse even in your absence. In case you are not with your life partner, the term life insurance plan not only provides financial coverage to the nominee but also takes care of their liabilities.

  • Taxpayers: Along with the benefit of term insurance coverage, one of the major benefits of buying term plans is that it offers tax benefits exempted under section 80C of the Income Tax Act.

  • Retirees: If you are a retired person, you can avail of the term insurance plan even past the age of 55-60. If you have a non-working spouse or child, you must buy a term life insurance that provides financial protection against income loss or in your absence.

  • Self-Employed People: If you are a self-employed person, buying a term plan is beneficial for you to ensure that the aspirations of your financial dependents are not compromised.

  • Working Women: For working women, managing work and the house could be difficult. But you can always safeguard your loved ones by buying a term insurance plan.

Why Do You Need Term Insurance?

Here’s a look at few reasons why you need term insurance:

  • To Protect your family: Being a sole earning member of your family, you are responsible for the well-being of your parents, spouse, and children. Buying a term insurance plan is important to make sure that you meet the obligations of your family even when you are not around.

  • To Pay Off your loans: You might have built different assets such as an office, vehicle, or home through loans. This plan ensures that the weight of these borrowings will not cause any financial difficulty to your family after you.

  • Stay Prepared for uncertainties: In case of your unforeseen death, the benefits from this term insurance plan can help your family pay for their regular expenses and also accomplish their long-time objective.

When Should You Buy Term Insurance?

When it comes to purchasing term insurance, it is better to start as early as possible. The early one buys the better it will be. Buying the right term plan ensures that you obtain the desired life coverage. The term insurance premium increases with your age which means that the insurance premiums will be low compared to the times if bought at a later stage of life. Hence, to make use of all the benefits of the term plan, it is advisable to purchase a term plan at an early age.

The below table will help you understand when is the right time to buy term insurance plans and how your term insurance premium rates increase with your age. Following premium rates are relevant for a non-smoker healthy male with a monthly payment mode and premium amounts paid on a regular basis for the policy tenure of 15 years with an option of income payout and life coverage of Rs. 1 Crore.

Age (in years) Premium amount
25 years Rs. 498
35 years Rs. 703
45 years Rs. 1445
55 years Rs. 3325

As you can see in the above-mentioned table, with the increase in age, the premium rates are also increasing for a term plan, In this, a premium amount of Rs. 498 is required to be paid by a non-smoker healthy male of 25 years whereas Rs. 703 will be paid by a 35-year-old male, indicating that the premiums are lesser at early ages.

Benefits of a Term Insurance Plan

Higher Sum Assured at Affordable Premiums

Term insurance plans offer a large amount of life cover at an affordable premium rate. This life cover can pay for several years of lost income.

Safety for Loans and Liabilities

The term insurance plan also helps in providing safety for the dependents from your fiscal liabilities such as loans or any other debts that you have. They can easily pay all the debt amount from the benefits received.

Cover against Critical illnesses

Various term life insurance plans also provide critical illness benefits to help you get good treatment for different life-threatening diseases/ailments without worrying about the expenses or bills. Policyholders can easily avail of critical illness cover for diseases mentioned under the plan by buying a critical illness rider with a term plan.

Tax Benefits

It offers tax savings benefit up to Rs. 1.5 lacs on the premium amount paid under section 80C of the Income Tax Act, 1961. Also, the lump sum benefit paid under this plan is exempted from taxes under section 10(10D).

Support in the case of Disability

Accidents can occur anytime anywhere and may lead to permanent or temporary disability. Disability coverage with a term insurance plan will provide financial support to your family in case of accidental disability.

Add-ons

Term insurance plans come with riders or add-ons that you can choose to get additional insurance benefits. Term riders such as waiver of premium, accidental death benefits, critical illness, etc. are attachments made to a base plan at low premium rates, giving the insured additional coverage and increasing the policy utility.

Multiple options for paying Premiums

Term policies are flexible in choosing the premium payment duration. You can either choose regular pay or limited pay options with your term life insurance plan.

Death Benefits

In case of the unforeseen event of demise during the tenure of the policy, the nominee/ beneficiary of the policy receives the total death benefit chosen at the time of commencement. He/she can also select to receive a regular income along with a lump sum payment in case of your absence.

Maturity Benefits

Term insurance plans don’t come with any survival or maturity benefits. If one wants maturity benefits, then a TROP (Term Return of Premium) plan is suggested.

Survival Benefits

A standard term insurance plan does not have any survival benefits if you outlive the policy term. However, a term plan with a return of premium plan also provides you with a lump-sum payment or regular income in form of guaranteed benefits to help you achieve varied financial objectives. This plan pays back the sum that is at least equivalent to the total paid premium. You get these guaranteed payouts at the end of the plan tenure.


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