In this article, we will see how term life insurance works, its benefits, and its importance in keeping your loved ones' life financially secure.
Term insurance is a great financial tool to secure your family’s financial future in case of untimely events. In this article, we will see how term life insurance works, its benefits, and its importance in keeping your loved ones' life financially secure.
What is a Term Insurance Policy?
A term insurance plan is a legal agreement between the insured and the insurance provider. According to this agreement, the insurance provider provides the sum insured to the nominee of the policyholder in case of his/her death during the tenure.
There are numerous companies that provide different types of term insurance policies. A term insurance policy is also one of the most affordable life insurance plans you can purchase. Therefore, it is important to understand what they exactly mean and what would be the perfect policy for you and your family.
Benefits of Term Insurance Policy
Life cover is the most important benefit that term insurance offers. In case the policyholder dies during the tenure of the policy, his/her nominees can receive a sum assured amount.
By purchasing a term insurance policy, you can save up to Rs. 1.5 lakh on premium payments under Section 80C of the Income Tax Act. Furthermore, if you opt for the critical illness add-on, then you can get additional tax benefits.
Some companies hand out a monthly or annual payout of the sum insured in case the nominee cannot handle a significant lump sum amount all at once.
In case you buy a term insurance policy and now wish to add another benefit to it, you can purchase a rider along with your policy. For instance, you can purchase the critical illness add-on. If you choose to get this add-on, a particular amount will be paid to the policyholder for the treatment should the need arise.
Types of Term Insurance Policies
It is the most popular type of term insurance. The sum assured remains the same here throughout the policy term. The younger you are, the lesser the premium amount will be.
This type of plan is usually purchased by large organisations, syndicates, etc. The benefits remain the same as a standard term plan.
There are some policies that provide all the premium paid by the insured back to them in case he/she survives the term.
The increasing term plan provides an option to increase the assured sum at some points. This plan can be used keeping in mind how inflation increases the price and cost of living and ensuring your family keeps up with the growing demands of life.
The decreasing term plan can be used when you have liabilities, such as loans, that need to be repaid. Here the sum assured will decrease gradually.
This can be beneficial because liabilities tend to decrease as you grow, and you might not require the same life cover amount during the tenure. Hence, you can opt to lower the life cover amount as your liabilities reduce with this plan.
If you buy a standard term plan but want to change it to a whole life insurance policy, then you can use this option. You can also use it to be converted to any other plans. It is usually used when you expect your financial situation to improve, in which case you can opt for a better term insurance plan.
Conclusion
In conclusion, a term insurance policy is one of the easiest ways to secure your family’s financial condition in case of untimely crisis. It is a must-have tool that can guarantee your family's safe future in your absence.
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