Features
- Life Cover till 85 years for Life & Life Secure Option
- 3 Payout Options
- Special Rates for Women
- Option to exit the policy with premium refund at the age of 60*
- Special Rates for Non-Tobacco Users
- Free Medical Check Up every 5th year**
Ref. No. KLI/22-23/E-BB/492
Term Insurance Benefits: Top 11 Benefits of Term Insurance Plan
Term life insurance provides financial protection to your loved ones in the event of your untimely demise, ensuring that your financial goals for your family are met even in your absence.
- 3,744 Views | Updated on: Jun 27, 2024
You set countless financial goals for your family and build financial strategies to accomplish them. However, the fulfillment of these financial goals could come to a halt in your absence. One of the best ways to accomplish this is to buy term life insurance, a financial decision that guarantees benefits.
Before diving into the benefits you can enjoy with a term insurance policy, it is important to answer one fundamental question, “what is term life insurance?”. Term life insurance is an excellent way to financially protect you and your loved ones after an unfortunate event. Your beneficiaries receive term insurance benefits, which are pure insurance policies that are highly affordable and simple.
Benefits of Term Life Insurance that can be Life-changing
From improved health with regular checkups to reduced medical bills, these benefits of term insurance can create a ripple effect, transforming policyholders’ lives profoundly. Some of the most sought-after term insurance benefits are mentioned below:
1. High Sum Assured at Affordable Premiums
One of the primary benefits of term insurance is the availability of large covers at relatively affordable premiums. Moreover, the earlier you buy it, the lower the premium. In addition, you can find numerous term insurance premium calculators that do the math for you, making the process hassle-free.
2. Easy to Comprehend
Simplicity is one of the momentum for the growing popularity of term insurance plans. Term insurance is a pure life cover that offers your loved ones the sum assured in case of an eventuality. All one needs to ensure is that the premium is paid on time.
3. High Coverage
A term plan ensures a significantly higher sum, allowing you to leave enough money for your family and dependents to avoid financial difficulties in your absence. Compared to traditional, ULIP, or endowment policies, term insurance provides around 60 times the coverage.
4. Income Tax Benefits
Not only are the premiums you pay for a term plan tax-deductible, but the payouts also come with tax exemptions. The three tax exemptions under the Income Tax Act 1961 include:
- Section 80C: You can claim a deduction of up to ₹1.5 lakh for certain investments and purchases, including the premium paid for term plans.
- Section 80D: For premiums paid towards health-related coverage like critical illness riders, you can claim deductions up to ₹25,000.
- Section 10 (10D): While claiming the payout of a term plan, you can get a tax exemption on the entire amount.
5. Multiple Death Benefit Payout Options
Your financial liabilities, like loans or debts, may fall on your family in your absence. Here, the different payout options of the term plan play a critical role. In case of your demise, your beneficiaries may get a lump sum to help them manage the abovementioned liabilities.
6. Add-On Riders to Strengthen the Insurance
A rider is an optional add-on cover to the base insurance that gives additional benefits. You can enhance the terms of insurance benefits by adding riders like accidental death, permanent disability, waiver of premium, etc., by paying a nominal additional premium.
7. Critical Illness
Coverage Illnesses can occur during any phase of life, and receiving the necessary treatment can drain all your savings. Though the benefits of term insurance only offer life cover, you can choose to get critical illness coverage via riders and pay for the treatment without spending up your savings.
8. Return of Premium Option
A pure-term plan does not provide any benefit on maturity. However, you can get term insurance with maturity benefits if you opt for the return of premium option. Though you pay higher premiums for this option, you also get back the total premiums if you survive the policy tenure.
9. Financial Security for Dependents
One of the primary purposes of life insurance is to provide financial security to dependents in the event of the policyholder’s demise. Term insurance ensures beneficiaries receive a lump sum payout, helping them maintain their lifestyle and meet financial obligations.
10. Early Payout in the Event of Terminal Illness
Some term insurance policies offer accelerated death benefits, allowing policyholders diagnosed with a terminal illness to receive a portion of the death benefit while still alive. This feature can be invaluable in covering medical expenses and improving the quality of life during a challenging time.
11. Supplemental Coverage During Critical Years
Term insurance often covers critical periods when financial responsibilities are high, such as raising a family or paying off a substantial loan. This targeted coverage provides peace of mind during these crucial years.
Benefits of Investing in a Term Insurance Plan Early in Life?
Investing in a term insurance plan early in life can offer numerous benefits, including low premiums, a long coverage period, and a high sum assured. Here is a detailed look at the advantages of term insurance:
Low Premium
Insurance companies calculate premiums based on risk, which tends to be lower for younger individuals. Consequently, buying a term insurance plan early typically results in lower premiums. Once you lock in a premium at a younger age, it generally remains fixed for the duration of the policy, protecting you from future increases in premium costs as you age.
Long Coverage Period
Purchasing a term insurance plan early ensures that you have coverage for a longer period, which can span the majority of your working years and beyond, providing financial security for your dependents. Long-term coverage helps in aligning with major life goals such as children’s education, marriage, and retirement planning.
High Sum Assured
A high sum assured provides peace of mind knowing that your family will be financially independent and able to maintain their lifestyle and meet financial obligations even in your absence. It can also cover any outstanding debts or loans, ensuring that your family is not burdened financially.
Key Takeaways
- Term insurance plan offers huge coverage at relatively low premiums, especially when purchased early.
- It can provide flexible payout options to help manage financial liabilities like loans or debts.
- Premiums for term plans are tax-deductible under Sections 80C, 80D, and 10 (10D) of the Income Tax Act.
- Early purchase of a term plan ensures coverage through critical financial responsibility years.
Wrapping Up
Term insurance is a versatile and cost-effective tool that offers a range of benefits, from providing financial security to easing the burden of estate taxes. Its simplicity, affordability, and flexibility make it an attractive option for individuals looking to safeguard their loved ones and secure their financial future.
As with any financial decision, it is essential to carefully evaluate individual needs and consult a financial advisor to determine the most suitable insurance strategy.
FAQs on the Benefit of Term Insurance
1
How do I determine the right amount of term life insurance coverage?
To determine the right amount of term life insurance coverage, consider your financial obligations, such as debts, living expenses, and future goals like children’s education. A general guideline is to aim for coverage that is 10-15 times your annual income.
2
Does a term insurance plan give maturity benefits?
No, term insurance plans do not provide maturity benefits. They offer a death benefit to the beneficiaries if the policyholder passes away during the policy term but do not pay any amount if the policyholder survives the term.
3
Can I withdraw funds from my term insurance plan?
No, you cannot withdraw funds from a term insurance plan. Term insurance is purely a protection plan that provides a death benefit and does not have a savings or investment component.
4
Can I purchase multiple-term insurance plans?
Yes, you can purchase multiple term insurance plans to increase your overall coverage. This can be useful if your financial responsibilities grow or if you want to diversify your insurance providers.
5
How should I decide on the required term insurance coverage?
To decide on the required term insurance coverage, assess your current and future financial responsibilities, including debts, living expenses, and major life goals. Use the rule of thumb of 10-15 times your annual income as a starting point and adjust based on your specific needs.
Suggested Readings
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Features
- Life Cover till 85 years for Life & Life Secure Option
- 3 Payout Options
- Special Rates for Women
- Option to exit the policy with premium refund at the age of 60*
- Special Rates for Non-Tobacco Users
- Free Medical Check Up every 5th year**
Ref. No. KLI/22-23/E-BB/2435