What is a 20 Year Term Insurance Plan?
A 20 year term insurance policy provides financial protection to the designated beneficiaries after the policyholder’s unfortunate demise, the coverage extends for a specified duration of 20 years. In other words, it is a life insurance policy with a fixed tenure of 20 years. If the policyholder passes away during this term, the insurance company pays out a death benefit. Otherwise, the policy lapses on the expiry of 20 years.
How Does a 20 Year Term Insurance Plan Work?
After understanding term insurance, it is time to examine how it works. This plan remains in force as long as premiums are regularly paid. The good thing is that term plans feature lower premiums than permanent insurance. Thus, you do not have to worry about being unable to afford the premiums.
If you pass away during the duration of a 20 year term plan, the designated beneficiary would receive a death benefit. However, if you survive the entire policy term, there will be no maturity benefits provided to you or your beneficiaries.
Benefits of a 20 Year Term Insurance Plan
A 20 year term plan offers various benefits that make it a popular choice among individuals looking for financial protection. Here are some key 20 year term insurance benefits:
Extended Cover
A 20 year term plan provides coverage for an extended duration, as compared to other plans available in the market, such as 5 year term insurance.
Death Benefit
The primary benefit of a term insurance plan is the death benefit, which provides a lump sum payout to your beneficiaries if you pass away during the term of the policy. This payout can help your family cover expenses, repay debts, maintain their lifestyle, or achieve other financial goals.
Income Tax Benefit
Investing in a 20 year term life insurance offers a double tax advantage. First, you can deduct a portion of your premiums from your taxable income each year up to the limit set by Section 80C of the Income Tax Act. Second, the death benefit paid to your beneficiaries is typically exempt from taxes under Section 10(10D) of the Income Tax Act, 1961. This makes term life insurance a smart financial strategy to secure your family’s future while reducing your tax burden.
Surrender Benefits
While term insurance plans typically do not offer surrender benefits like cash value or loan facilities as permanent life insurance policies do, some insurers may provide surrender benefits in the form of a return of premium (ROP) option or partial surrender facility. These options allow policyholders to receive a portion of the premiums paid if they choose to surrender the policy before the end of the term.
Additional Riders
Many insurers offer additional riders or optional benefits that can be added to a 20 year term insurance plan for enhanced coverage. These riders include critical illness, disability income rider, accidental death benefit rider, and waiver of premium rider. With these riders, you get an extra layer of protection against specific risks, offering additional financial security to you and your family.
Affordable Premium
Compared to permanent life insurance policies, term insurance plans typically have lower premiums, making them a cost-effective option for obtaining substantial coverage. The affordability of premiums allows individuals to secure comprehensive financial protection for their loved ones without straining their budget.
How to Select a Suitable 20 Year Term Insurance Plan
Selecting a suitable 20 year term insurance plan involves a few essential considerations to ensure it aligns with your financial needs and long-term goals. Here’s a breakdown of the key factors:
Coverage Amount
Choose a coverage amount based on your financial obligations, such as any outstanding loans, family expenses, and future goals like children’s education. Ideally, the coverage should be at least 10-15 times your annual income, providing adequate support for your dependents.
Premium Affordability
Ensure the premium amount fits comfortably within your budget. Remember, term insurance is meant to provide affordable protection, so look for plans that offer high coverage without significantly affecting your monthly finances.
Claim Settlement Ratio
The insurer’s claim settlement ratio is crucial. A higher ratio means a greater likelihood that the insurer will settle claims promptly and fairly. Choosing a provider with a solid track record ensures peace of mind that your family will receive the benefits without hassle.
Additional Riders
Many insurers offer riders, or add-ons, that enhance your coverage. Common riders include critical illness, accidental death, and waiver of premium. Consider these options if you need additional protection, as they can provide substantial benefits for a relatively low additional cost.
Policy Term and Flexibility
Ensure the 20 year term aligns with your anticipated financial responsibilities. Some insurers also offer flexible terms or renewal options, allowing you to extend coverage if needed. This flexibility can be beneficial, particularly if you foresee your financial obligations extending beyond the 20 year mark.
Inflation and Lifestyle Adjustments
It is essential to factor in inflation when deciding on your coverage amount. Costs generally increase over time, so it might be wise to select a higher coverage amount to account for future price changes and lifestyle adjustments.
Ease of Purchase and Customer Support
Finally, review the application process and the insurer’s customer support quality. A streamlined purchasing process, helpful agents, and reliable customer service can make a difference, especially when you or your family need assistance.
By assessing these factors, you can select a 20 year term insurance plan that offers security, aligns with your financial capacity, and provides sufficient protection for your loved ones.
Conclusion
Term insurance plans are a practical choice for individuals seeking to safeguard their family’s financial well-being. A 20 year term life insurance offers straightforward protection for 20 years. If something happens to you, your loved ones will receive a financial payout to cover bills, debts, or future goals. A 20 year term insurance is flexible and easy to understand, so by buying it, you can focus on your family’s well-being.
FAQs on 20 Year Term Insurance
1
Are there any provisions for increasing the coverage amount at specific intervals during the 20 year term?
Typically, term insurance policies do not offer provisions for increasing coverage amounts during the term.
2
Can I include coverage for critical illnesses or chronic conditions in my 20 year term insurance policy?
Yes, you can usually include coverage for critical illnesses or chronic conditions as riders to your 20 year term plan.
3
What happens if I want to surrender or cancel my 20 year term insurance policy before the end of the term?
Surrendering or canceling your 20 year term insurance policy before the term ends may result in financial penalties or loss of benefits.
4
Can I convert my 20 year term insurance policy into a joint policy with my spouse during the term?
Converting your 20 year term life insurance policy into a joint policy with your spouse might be possible, depending on the terms of your policy and the insurer’s policies.
5
Can I adjust the frequency of premium payments during the 20 year term?
The frequency of premium payments is generally fixed for the 20 year term. You must carefully decide on the premium payment frequency before finalizing the policy.
6
Can I include coverage for specific hereditary conditions or genetic disorders in my 20 year term insurance policy?
Coverage for specific hereditary conditions or genetic disorders may be available as riders, depending on the insurer and policy terms.
