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Term insurance is a simple life insurance policy offering financial protection for a period. Term insurance benefits include affordable premiums, tax exemptions, and flexible coverage options with additional riders, making it a reliable way to secure your family’s financial future.
You set countless financial goals for your family and build strategies to accomplish them. However, the fulfillment of these goals could come to a halt in your absence. One of the best ways to make sure this does not happen 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.
From improved health with regular checkups to reduced medical bills, these advantages of term life insurance can create a ripple effect, transforming policyholders’ lives profoundly. Some of the most sought-after term insurance benefits are mentioned below:
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.
Also, term insurance for housewives offers coverage at more affordable premiums, making it easier for them to secure financial protection. In addition, you can find numerous term insurance calculators for premiums that do the math for you, making the process hassle-free. However, in limited premium pay, one of the types of premiums in term insurance, the amount is higher, allowing you to pay faster installments.
Whole life insurance provides lifelong protection, ensuring your family receives financial support even after you pass. Unlike regular term plans, which end after a set period, whole life insurance extends coverage until 99 years or more. With this option, you can safeguard your loved ones for life while also enjoying flexible premium terms. It is an excellent choice if you want security for the long haul.
This is one of the most attractive benefits of term insurance plan. In the return of premium option, all your premiums are refunded if you outlive your policy. While it comes with higher premiums than standard term plans, it offers the benefit of receiving your money back if you do not make a claim. It is ideal for those seeking both coverage and a financial return.
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:
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.
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.
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.
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.
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.
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.
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.
Age is an important term insurance eligibility criteria. 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 term plan benefits of starting early in life:
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. The term insurance age limit starts at 18, and you can get the best premium amounts if you buy a policy at this time.
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.
For instance, a 25-year-old may secure coverage extending up to 80 or 90 years, while a person buying term insurance at age 40 might not qualify for such an extended term. Additionally, the longer the coverage period, the more prolonged the protection your plan offers against risks.
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. Thus, buying a ₹2 Crore term insurance or ₹5 Crore term insurance is a wise choice for a secured financial future of your family.
Choosing the right term insurance plan can feel like a daunting task, but with the right guidance, you can secure a policy that is perfectly tailored to your needs. In 2024, here is how you can evaluate and pick the best term insurance plan:
The sum assured is essentially the amount your family will receive in the unfortunate event of your passing. When selecting a term insurance plan, think about the future needs of your family, whether it is paying off a home loan, supporting your children’s education, or managing day-to-day expenses. A good rule of thumb is to opt for a sum assured that is at least 10 to 15 times your annual income. It is all about ensuring that your family has the financial cushion they will need to maintain their standard of living.
The policy term is the duration for which your life is insured. Ideally, this term should match your financial obligations. For instance, if you have a home loan you will pay off in 20 years, you would want your term plan to cover that same period. Choose a policy term that extends until you expect to be free from major financial responsibilities. Many insurers offer flexible terms that can range from 10 years up to a lifetime.
One of the key attractions of term insurance is its affordability. To maximize this benefit, comparing premium rates across different insurers is important. Typically, the younger and healthier you are when you purchase a policy, the lower your premium will be. Be sure to use premium calculators available online to compare options and lock in a policy that balances coverage at an affordable rate.
The Claim Settlement Ratio (CSR) is a crucial metric that reflects the insurer’s trustworthiness. A high CSR means the company successfully pays a large percentage of claims. This gives you confidence that your family won’t face unnecessary hassles when making a claim. Look for insurers with a CSR of 95% or above to ensure reliability and peace of mind.
Riders are like little add-ons that can significantly enhance your coverage. Whether it is critical illness cover, accidental death, or waiver of premium, adding riders to your term insurance can provide extra protection at a nominal cost. Riders can be customized based on your specific needs, helping you cover scenarios that basic term insurance might not. It is smart to make your policy more comprehensive without breaking your savings.
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.
1
There are numerous term insurance benefits, including affordable premiums, financial security for dependents, and flexible payout options. You can opt for coverage that provides a high sum assured at a low cost, ensuring your family remains financially secure in your absence. Additionally, term life insurance can include riders for added benefits such as critical illness or accidental death coverage, further enhancing your policy’s protection.
2
Term insurance policies come with tax benefits under the Income Tax Act 1961. Premiums paid for the policy can be claimed as deductions under Section 80C, up to ₹1.5 lakh. If you’ve opted for health-related riders, such as critical illness, additional deductions under Section 80D (up to ₹25,000) are available. Your beneficiaries’ death benefit is tax-exempt under Section 10(10D), ensuring the entire payout remains untouched by taxes.
3
The benefits of term life insurance bought at an early age include lower premiums and longer coverage periods. Since insurers assess lower risks for younger individuals, the premium is more affordable and stays fixed throughout the policy term. Additionally, buying early ensures coverage during key life stages, such as starting a family or paying off long-term debts, providing peace of mind for an extended period.
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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
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
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.
7
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.
8
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.
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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
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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