Benefits of Term Insurance That You Should Know
Updated On Jul 19, 2021
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Term insurance policies are one of the most important types of life insurance policies to purchase in the present era. Term insurance not only protects your family financially in the event of an emergency but also saves you money on taxes. The advantage of a number of other perks can be taken as well. Take a look at the benefits of term insurance listed below.
Benefits of Term Insurance Policies
A term insurance policy can offer you the following benefits.
1. Easily Understandable
While purchasing a life insurance policy, you may find it difficult to understand the insurance-specific terms used in various life insurance policies. Term insurance policies are simple to understand, which is one of its most enticing features. Because it is solely a life insurance policy, a term insurance policy does not include an investment component. So, you pay the premiums, and the term insurance benefits are provided by the insurer covering your life for a set period of time.
2. High Sum Assured at Reasonable Premium Prices
A term insurance policy is the most basic and simple life insurance policy. The low cost of term insurance is one of its main advantages. A term insurance policy has a modest premium that you can afford when compared to other types of life insurance. Another significant benefit of term insurance is that you can get high coverage at affordable premiums if you purchase the policy at a young age. Furthermore, purchasing term insurance online may result in a lower price than buying it offline. In other words, the cost savings made by the insurer are passed on to you among the perks of term insurance.
3. Tax Benefits
Tax advantages are available with term insurance policies. While the premiums for term insurance plans are tax-deductible, the payouts are likewise tax-free under current tax legislation. The premium you pay to obtain a term insurance policy is tax-free up to a limit of Rs. 1.5 Lakh per year under Section 80C of the Income Tax Act 1961. Moreover, according to Section 10(10D) of the Income Tax Act of 1961, the death benefit of term insurance plans is tax-free.
4. Various Payout Options
Your family members will be burdened with repayment of your financial obligations like home loan, car loan or personal loan after your demise. It's here that term insurance's numerous payout choices come into play. In the event of your untimely death, your dependents may receive a lump sum payment to assist them in managing the aforementioned financial obligations. Moreover, many term insurance policies also allow you to receive a regular monthly income in addition to the lump-sum death payout. Your family may find it easier to manage routine expenses with this monthly income.
5. Rider Options
Riders are additional benefits that you can add to your term insurance policy to augment the basic benefits. By paying a small additional cost, you can add these riders to your term insurance policy. Some of the options available are critical illness cover, accidental death cover, accidental disability cover, waiver of premium etc.
6. Return of Premium Option
In the case of life insured's untimely death, a pure term insurance plan only offers life coverage to the beneficiary. It has no advantage when it comes to maturity. However, if you choose the return of premium option on a term insurance policy, you will receive a maturity benefit. This choice will require you to pay higher premiums, but you will receive a refund of all premiums paid if you survive the insurance term. However, any taxes, levies, rider premium, or the modal amount paid on the premium will not be included in the total premium amount that would have to be returned.
Endnotes
You may believe that if you live a certain way, nothing wrong will happen to you. However, premature death is possible due to events beyond your control, such as an accident or disease. Purchasing a term insurance policy is crucial because it relieves your family of the financial strain that might otherwise occur if you were to pass away.
Also read - What Shall be the Suitable Policy Term of Your Term Insurance?
