Updated on: 18 July 2023
After the outbreak of the coronavirus pandemic, everybody’s lives were turned upside down with infinite hurdles and uncertainties. One of the most crucial lessons it taught us was to plan out finances, encouraging many people to buy term life insurance.
Key takeaways
- Term life insurance is a policy that guarantees to pay a benefit only if the insured dies.
- Determining the appropriate coverage amount is the foundation of a term insurance policy.
- Term insurance policies often come with riders or add-on benefits that can enhance coverage.
- Looking at the term insurance calculator is the first step to take when purchasing a term insurance policy.
- When buying a life insurance policy, you may occasionally have to decide between single premiums and recurring premiums.
- The claim settlement ratio indicates your likelihood of receiving the reimbursement after submitting a legitimate claim.
Therefore, even if you are single, planning should be the first step while preparing for unforeseen circumstances, including critical illness, rising inflation, debt, and much more. With term insurance, you can get financial security with the cover of an adequate amount.
Keep reading to learn the benefits of buying term life insurance and some essential factors to consider before you buy a term plan.
What is Term Insurance?
Term insurance offers financial coverage to the policyholder. The company pays the death benefits to the beneficiary in case of the death of the insured individual. Therefore, the purpose of taking term insurance is to get a whole life cover for the policyholder and provide financial assistance to their family.
Even if there are no maturity benefits, you will still enjoy a stress-free life without worrying about what will happen to your family when you are gone. Make sure you have done your homework and selected a plan appropriate for your needs before opting for the right term insurance plan.
Benefits of Term Insurance
Whether you are starting your career, planning to get married soon, or securing your mortgage, term insurance offers numerous advantages that make it a valuable tool in your financial planning toolbox. Let’s look at some of the benefits of term insurance:
Complete Financial Security
High coverage at reasonable premiums is the single significant characteristic that distinguishes a term insurance plan from other life insurance plans. Term plans give you the choice of having a substantial sum assured at a modest cost, while other plans can provide guaranteed returns, recurring money backs, or lifetime annuities. This would enable you to provide comprehensive financial security for your family at a reasonable cost.
Enhanced Coverage
Some insurance providers give the customer a choice to increase the life insurance throughout crucial times in their life. This enables him to begin with a basic level of coverage and expand it as his obligations grow and his ability to pay higher premiums increases.
Term Insurance Policies Cover Your Health as Well
The health issues have worsened due to irregular work schedules, bad eating habits, and alcohol and tobacco use. Be mindful that disease has no regard for an individual’s age and might strike at any time. What would happen if a serious illness was discovered in you? Do you believe that you or your parents could afford the high medical costs? What’s worse, do you believe your family could cover your medical expenditures on their own if you lost your job? Consider buying a term insurance policy that provides full financial protection against diseases.
Offers Tax Benefits
A term insurance policy not only provides financial stability but also offers tax advantages in accordance with current tax rules. A tax deduction of up to ₹1.5 lakh is allowed for term insurance premium payments under Section 80C of the Income Tax Act of 1961. Similar to this, Section 80D allows you to receive tax benefits for up to ₹25,000 in critical illness benefits. Additionally, your family will receive tax-free benefits.
You can benefit greatly from term insurance policies if you choose to purchase one. While you are still single, you should choose term insurance coverage for both practical and emotional reasons. The main advantage of these policies is that you have complete peace of mind regarding your family. You will feel relaxed after you start term insurance to know that your loved ones’ needs will be met once you go to your final home.
Things to Consider When Buying Term Insurance in India
When it comes to safeguarding your financial future, term insurance is a popular choice. It provides a cost-effective way to protect your loved ones and fulfill their financial needs in case of an unfortunate event. However, choosing the right term insurance policy requires careful consideration. Before making a decision, it is crucial to evaluate various factors to ensure that you make an informed choice that suits your specific requirements.
It would be best if you had term insurance to keep your family from going through financial difficulties after your demise. The importance of life insurance is, therefore, undeniable. But first, look at the things to consider before buying term insurance:
Term Insurance Calculator
Looking at the term insurance calculator is the first step to take when purchasing a term insurance policy. It would be best if you got a life insurance policy with a minimum of 10 times your annual income coverage. This will make it easier for your household to handle inflation and growing prices. Additionally, with a term insurance calculator, you can confirm whether the return can assist your family or not.
Coverage Amount
Determining the appropriate coverage amount is the foundation of a term insurance policy. Consider your family’s current lifestyle, future financial goals, outstanding debts, and daily expenses when calculating the coverage you require. It should be sufficient to replace your income and provide financial stability to your dependents in your absence. A general guideline is to aim for a coverage amount that is 10-15 times your annual income.
Choose Wisely Between Single Premium and Regular Premium Policies
When buying a life insurance policy, you may occasionally have to decide between single premiums and recurring premiums. Many people mistakenly believe that simply because they can afford to pay a one-time premium, it makes sense. The yearly premium is also a great choice that will be practical for most people. Compare the pros and cons for both and choose the option that suits your financial outflow.
Choose Term Insurance Riders Wisely
Riders are a terrific add-on for a term insurance policy; choose the ones you actually need or if they apply to your lifestyle. In other words, if you travel frequently and are alone, your risk of dying in an accident is higher. In that case, you can add an accidental rider. Following are some types of term plan riders.
- Accidental Death Rider
- Permanent & Partial Disability
- Critical Illness
- Waiver of Premium
- Income Benefit Rider
Term insurance policies often come with riders or add-on benefits that can enhance coverage. Assess your individual needs and check if any riders are available that can provide additional protection. However, keep in mind that riders usually increase the premium amount, so weigh the costs against the benefits.
If you don’t want to purchase a separate policy but feel the need to cover the possibility of developing a critical illness in the future, you can add critical coverage.
Claim Settlement Ratio
The claim settlement ratio indicates your likelihood of receiving reimbursement after submitting a legitimate claim. Each insurance provider gives a percentage representation of their claim settlement ratio. The percentage represents the balance of the number of shares they settled to the total number of claim requests received. Always choose an insurance company with a higher proportion of claims paid.
Conclusion
Buying term life insurance allows you to amass a fortune and gives your loved ones financial stability while you are away. Term insurance plans are available for everybody, no matter their age. Whether in your 20s or 50s, term insurance is an excellent way of getting secured despite growing families and increasing liability. With all the mentioned things to consider before buying term insurance, including plan tenure, claim settlement ratio, and term insurance calculator, you can get a good plan without worrying about future uncertainties.
