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Term Insurance Benefits

A term insurance plan includes tax advantages and safeguards your family's financial stability in the event of the untimely demise of a policyholder.

  • 949 Views | Updated on: Mar 05, 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 protect you and your loved ones financially; after an unfortunate event, your beneficiaries receive benefits, and these are pure insurance policies that are highly affordable and simple.

11 Benefits 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.

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.

Key takeaways

  • The primary purpose of term insurance is to provide financial security for dependents in the event of the policyholder’s death.
  • Term insurance is known for its affordability, allowing individuals to obtain substantial coverage at a reasonable cost.
  • With lower premiums than other life insurance options, term insurance enables policyholders to secure higher coverage amounts.
  • Term insurance policies offer flexibility in terms of coverage duration.
  • Some term insurance policies offer conversion options, allowing policyholders to switch to a permanent life insurance policy without needing a medical exam.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

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.

Amit Raje
Reviewed By :
Prasad Pimple

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

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