Benefits of Term Life Insurance
From improved health with regular checkups to lower medical bills, the benefits of term life insurance can have a big
impact, making a positive difference in the lives of policyholders. Some of the most common benefits of term
insurance are listed below. Life insurance can provide the financial
security your family needs..
- Affordable Premiums
- Whole Life Coverage
- Return of Premium
- Income Tax Benefits
- Multiple Death Benefit Payout Options
- Add-On Riders to Strengthen the Insurance
- Critical Illness
- Return of Premium Option
- Financial Security for Dependents
- Early Payout in the Event of Terminal Illness
- Supplemental Coverage During Critical Years
1. Affordable Premiums
One of the primary term insurance benefits is the availability of large covers at relatively affordable premiums. At
a monthly premium of ₹475, you can get a ₹1 Crore term insurance.
Additionally, term insurance for
housewives
provides coverage at affordable premiums, making it easier to secure financial protection for homemakers.
2. Whole Life Coverage
Whole Life Coverage in certain term insurance plans now offer extended coverage, providing financial security up
to 99 years of age. Unlike traditional term plans that have a fixed tenure, these extended-term policies ensure
long-term protection, making them an excellent alternative to whole life insurance. This feature
allows
policyholders to secure their family’s financial future for an extended period while keeping premiums lower than
permanent life insurance plans.
3. Return of Premium
A term plan with return of
premium offers a powerful guarantee. If you survive the policy term, the insurer
refunds every premium you have paid. You get complete financial protection for the entire duration and your money
back if you never have to use the policy.
4. Income Tax Benefits
Not only are the premiums you pay for a term insurance plan tax-deductible, but the payouts also come with tax
exemptions as explained in our term insurance tax benefits
guide.
- 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
In the event of the policyholder’s demise, term insurance offers various payout options to help beneficiaries manage
financial responsibilities effectively. Instead of a one-time lump sum payout, policyholders can opt for:
- Monthly Income Payout: Ensures a steady stream of income to cover daily expenses, making it ideal for families
dependent on a regular cash flow.
- Lump Sum + Monthly Income: A combination where a portion is paid immediately to clear debts or major expenses,
while the rest is distributed as a monthly income for long-term financial security.
- Increasing Monthly Payout: Some insurers provide an option where the monthly income increases annually to
counter inflation, ensuring that the family’s financial needs are met in the future.
- Choosing the right payout option is crucial based on family needs. If beneficiaries are financially savvy, a
lump sum might be best, but if they require structured support, a monthly income payout can prevent
mismanagement and ensure lasting stability.
6. Add-On Riders to Strengthen the Insurance
Riders are optional add-on covers that enhance the benefits of your base term insurance policy. By paying a nominal
additional premium, you can include riders such as accidental death cover, permanent disability cover, and waiver of
premium, among others. These riders provide extra protection tailored to your specific needs, making your term plan
more comprehensive.
7. Critical Illness
Critical Illnesses can occur during any phase of life, and receiving the necessary treatment can drain all your
savings. Though the advantages of term life 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. 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.
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. 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
Age is a critical part of the term
insurance eligibility criteria. Securing a term insurance plan early delivers
powerful advantages. You get low premiums, an extended coverage period, and a high sum assured. These are the core
term plan benefits of starting your policy as soon as possible:
Low Premium
Insurers reward younger applicants with the lowest available premiums. When you buy a term insurance plan at a young
age, you lock in that low rate for the entire policy duration. This premium will not increase as you get older,
protecting you from higher costs. The official term insurance age limit begins
at 18. Acting early guarantees the
most affordable premium for decades, which is one of the key benefits of term life insurance policy. It is a
permanent financial advantage you secure for yourself.
Long Coverage Period
Securing a term plan early locks in coverage for an incredibly long time, right through your working years and deep
into retirement. That extended protection is a rock solid guarantee for your family's financial future, no matter
what happens. It is designed to fund life's biggest milestones, like a child's university degree, a wedding, your
own retirement. A person who buys a policy at 25 can get coverage that lasts until age 90. The earlier you start,
the stronger and more permanent your financial fortress becomes.
High Sum Assured
A high sum assured is the core of your family's financial independence if you are not there. It empowers them to
maintain their lifestyle and manage all financial responsibilities without compromise. When people ask what are the
benefits of term insurance, this is the answer. The policy clears all outstanding debts and loans, so your family
starts with a clean slate. This is not just a safety net; it is their foundation. Opting for a ₹2 Crore term
insurance policy is a decisive action to secure that future.
How can Term Insurance Safeguard Your Family’s Future?
Term insurance provides essential protection for your family’s financial security. It is structured to manage the
specific financial hardships that can occur in your absence.
Replacing Lost Income
Your family’s financial security is directly tied to your income. Should something happen to you, their ability to
manage daily expenses would be immediately compromised. A term policy provides a significant, tax-free lump sum
payment to your beneficiaries. This payout functions as a direct income replacement. It allows your family to manage
all essential costs like housing, daily necessities, and education without financial pressure, ensuring their
standard of living is maintained.
Covering Your Debts
It is common for individuals to have major financial obligations like a home mortgage, car financing, and personal
loans. These outstanding financial duties must be resolved by the estate following a death. This situation often
creates significant financial pressure on the family. One of the most practical term life insurance benefits is that
the death benefit is designed to settle these outstanding debts. A ₹1 crore term insurance plan delivers the
required capital to clear all such liabilities. This ensures your family will not be forced to sell assets or take
on new loans to manage these financial responsibilities.
How to Select the Best Term Insurance with the Right Sum Assured Option?
Finding the right term insurance policy is a matter of matching the necessary features with a competitive premium.
For the coverage amount, a standard financial planning guideline is to secure at least 10 to 15 times your current
annual income. For example, a person earning ₹20 lakh per year should secure a life cover between ₹2 crore and ₹3
crore. For individuals with more substantial financial obligations, a ₹5 crore term insurance plan offers a more
suitable level of protection.
However, the sum assured is only one part of the decision. You must examine the insurer's claim settlement ratio.
This figure shows the percentage of claims the company has actually paid out. A consistently high ratio is the
clearest indicator of an insurer's reliability and its commitment to protecting policyholders, which is essential to
ensure your family receives the full benefit from the plan.
Why to Choose the Right Term Insurance Plan?
Before you decide on a plan, you must understand its fundamental purpose. Term insurance is designed to deliver
direct financial assistance to your family for a specific period. This type of life insurance gives you
comprehensive coverage for a low premium, and if you pass away during the policy term, your nominee receives the
full assured sum as a death benefit.
To get a true grasp of term insurance, you have to look closely at its features and benefits. A detailed term
insurance comparison is the only way to be sure you are identifying the best options available.
- Insurance Coverage Against Uncertainties
A term insurance plan provides direct financial help to your family when they face unforeseen events like your
death or a serious disability from an accident. The structure is simple. You pay a small, manageable premium and
in return, you secure a significant amount of life coverage that acts as a financial wall around your loved
ones.
- Provides Coverage for Critical Illness
As you age, the risk of facing a critical illness like cancer, heart attack, or cardiovascular disease grows. The
treatments for these conditions are not only long and difficult but also incredibly expensive. A term insurance
plan with a critical illness rider gives you a powerful solution. This rider offers distinct benefits; if you
are diagnosed with a covered illness, you are paid a lump sum of money for treatment, protecting your life
savings from being wiped out.
- Provides Add-on Riders
When choosing a term plan, you have the option to add riders to customize your protection. Selecting a rider is
how you access additional benefits, significantly enhancing your coverage. This allows you to build a policy
that goes beyond the standard death benefit to cover specific risks you are concerned about, creating a truly
personalized set of term life insurance benefits.
- Offers Tax Benefits
The powerful tax advantages are some of the most practical term life insurance benefits. Tax deductions on your
paid premiums are available under Section 80C of the Income Tax Act 1961, for up to ₹1.5 lakh annually. A policy
that includes a critical illness rider unlocks further tax benefits for that premium portion under Section 80D.
The death benefit paid to your family is completely tax-free. This is a guarantee under Section 10 (10D). A
significant policy change is also coming. From 22 September 2025, the government's exemption of GST on life
insurance will reduce the premium cost for policyholders from the previous 18% tax rate.
- Offers Multiple Payout Options
Your family is not locked into a single payout method when you establish your term life insurance plan. You have
the freedom to select monthly, yearly, or quarterly distributions. This choice gives you complete control and
adaptability. It lets you design a payout system that delivers the most effective and sustainable financial
support for your family's long-term needs.
Wrapping Up
Term insurance is a powerful and efficient financial tool. Its job is to create instant financial security and even
reduce the impact of estate taxes. The combination of simplicity, low cost, and flexibility is what makes it the
undeniable choice for protecting the people you care about and guaranteeing their financial security.
Because this is a major financial decision, a careful evaluation of your personal needs is not just a suggestion, it
is essential. Consulting a financial advisor is the correct final step to build the most suitable insurance strategy
for your specific situation.
FAQs on the Benefit of Term Insurance
1
What are the term life insurance benefits?
The primary term insurance benefits are affordable premiums, rock-solid financial security for your
family, and flexible payout options. You get a high sum assured for a very low cost, which secures your
family’s finances if you are not there. Riders for critical illness or accidental death coverage build
another layer of powerful protection onto the policy.
2
What are the tax benefits of term insurance?
Term insurance gives you significant tax relief under the Income Tax Act, 1961. Your premium payments
are deductible up to ₹1.5 lakh under Section 80C. A critical illness rider provides another deduction of
up to ₹25,000 under Section 80D. The most important benefit is for your family. The death benefit your
family receives is completely tax-exempt under Section 10(10D). This shelters the entire payout from
taxes.
3
What are the benefits of buying term insurance early?
Getting term life insurance when you are young secures a lower premium for a longer coverage period. You
get a better rate, and that premium stays fixed for the entire policy's duration. Buying early means
your coverage is in place during key life stages. It protects you when starting a family or taking on
major debts.
4
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.
5
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.
6
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.
