The Importance of Term Insurance

Term insurance is an insurance plan that offers you coverage for your life and manages your loved ones after you. This type of life insurance policy covers the life at a low insurance premium and are active for a limited period of time or term. In short, the beneficiary gets the amount either in lump sum or in equal instalments or both as per the policy terms and conditions in case of the death of the insured during the tenure of the insurance.

A term insurance provides high life coverage at really low premiums. Also, it provides flexibility to choose from the wide range of the life cover options available.. Humans are surrounded by responsibilities and liabilities and a term insurance plan helps you in fulfilling those responsibilities even when you are gone. It sounds unfortunate to get death benefit plans, but today, life is unpredictable and we need to be prepared for anything. This is when a term insurance helps you. By covering your life risks, it provides a financial stability to your family after you.

The popularity of term insurance policy is due to its affordability and a high degree of cover that it provides for a fixed amount for a fixed tenure.

Why is a term insurance policy important?

Term insurance is important to cover the risk of life and ensure that your loved ones do not suffer the financial burden after you. The term insurance plans offer good life coverage at very nominal premiums and give you benefits which help the beneficiary in the long run.

•    It is very difficult for a family to survive when the bread earner of the family is gone due to an unfortunate reason. The family suffers not just emotional but also financial loss and in such cases, term insurance covers the financial security by providing death benefits to the beneficiary.

•    Debt burden is another liability that your family has to pay off after you, if you have taken any debt or loan, EMIs, etc. Term insurance rescues your family in that case and provides them with a source of financial support.

•    Term insurance also takes care of the daily expenses after the death of the bread earner of the family. It helps in taking care of the basic life needs such as food, clothing, and shelter.

Term insurance policy also has various benefits like covering funeral expenses, supporting the education of children, paying off loans and debts and other family expenses. Since these days, life has become so unpredictable and uncertain, it is very important to have a future financial security and term insurance policy is one of the best options to do that. It is important to have a term insurance as it gets these benefits also.

Tax benefits: Term insurance benefits you not only when you are gone but also when you are alive. You can get tax benefit under Section 80C of the Income Tax Act of maximum 1.5 lakh when you have a term insurance policy.  Also, maturity claim that is paid also gets you a tax-free income. You can also invest the amount you save by investing in term insurance policy and not in any other endowment insurance plan.

Easy to understand: Term insurance plans are very easy to understand. It includes the coverage of risks of life. The beneficiary gets the death benefit after the death of the policyholder.

Low premiums: Since it includes no investment element in the policy amount, the premium for term insurance policies are very low as compared to any other insurance plans. Anyone who takes term policy might have to pay just about one percent of the annual income to get their life covered.

Flexibility: Term insurance plans are very flexible. You can choose from the various offline and online plans available which don’t require mandatory health plans. You can also customize your term plan according to your convenience.

Financial Security: Everyone has financial liabilities and it gets worse for your family to handle those financial liabilities after you. Term insurance helps in saving your family from the financial burden after you. Term insurance takes care of your family’s financial needs.

Low claim rejection: It is important for you to disclose correct facts about your health, habits, finances and other things asked in the term policy because the Insurance Regulatory and Development Authority does not allow any insurance company to approve any claim that was bought with nondisclosure of facts after two years of the policy is effective.

Riders: These are the additional benefits that you get with term insurance plans suiting your requirements.  You can take the benefits with the payment of a nominal fee. These include benefits during critical illness, permanent, partial or complete disability, death due to an accident, etc. It is suggested to take a rider only when you need it and should always go through the offer thoroughly before including these into your policy.

It is very important that you keep a few things in mind while you choose a term insurance policy like:

•    It should be able to provide good financial support to your family in case of your absence.

•    It should always cover the tenure an individual works and should be for minimum of 65 years of age.

It is advised to buy term insurance at an early age because the younger you are, the lower is the premium that you need to pay for term insurance. But this does not apply that you cannot have a term insurance when you grow old. The advantages of term insurance vary according to the needs of the insured. This also varies according to your lifestyle habits. The healthier your habits are the lower will be the premium that you will have to pay. This is because the insurance company accesses the chances of you attracting lifestyle-related diseases and this is why a medical examination is done for term insurance, not always but yes. Specially after 30’s and this also stands as the ground for rejection of your proposal by the insurance company.