You choose the best for your family in all situations, and when it comes to life insurance policies, you become even more cautious. Keeping your loved ones protected is one of your top priorities, and many insurance companies help you achieve the same. One popular and commonly opted for plan is a term cover - a pure protection policy designed to provide financial assistance to your family in case of your unfortunate and unexpected demise.
Term insurance is also known as a risk cover policy as it ensures that your loved ones are protected against all kinds of risks, debts, and financial burdens that your sudden absence can bring. Let us look at some key features that term insurance coverage offers:
Features of Term Insurance in India
- The premiums paid against term plans are considerably low, while the term plan coverage is high.
- The tenure of the term insurance is fixed.
- Term insurance coverage provides a death benefit but not a maturity benefit.
- Tax benefits can be availed as per the Income Tax Act of 1961.
Let us try to understand how a term cover (or risk cover policy) works with the help of an example: You are 25 years old and purchase a term insurance coverage for 20 years with a sum assured of one crore, and its premium is two lakhs per annum. Here, your loved ones will get one crore if something happens to you during those 20 years. Though if you outlive the term period, no amount will be given.
However, life does not always work out the way you expect it to. For example, due to inflation, the sum assured value will not be the same as it is today, 20 years from now. Therefore, at any given point in time, the expenditures will differ according to the prevailing prices in the market. Along with this, your children’s school fees might increase, or you may buy a house under a loan, thereby increasing your financial liabilities. Thus, your life cover plan must cater to these changing needs by increasing your term insurance cover.
Increasing The Coverage
The primary way to increase your term plan coverage is to buy a new life cover plan, which requires you to go over the whole process again and the burden of managing two policies together. Though the chances of getting the proposal rejected increase with age, there is a solution to it, that is, you can increase the policy cover while buying it.
For example, it can be increased while buying your risk cover policy with a feature known as life-stage increment. This feature ensures that your cover is increased at every significant milestone of your life, e.g., marriage or when you have your child.
Another way would be to buy increasing term insurance. The purpose of this term plan is that the cover increases annually till it reaches a certain maximum amount. Here the premium may or may not increase, but the cover continues to grow along with your life.
Buying term insurance must be a well-thought-out plan and investing in the right insurance is even more critical to ensure that your financial needs are met. You and your family grow with time, and so do your needs. Therefore, your life plan cover should have your back every step of the way!
