What Are The Key Benefits Of Term Plans?
Published On Jan 27, 2022
Table of Contents
- 5 Term Insurance Benefits
Term life insurance is a kind of life insurance plan that provides death coverage to policyholders for a specific time limit. That is, if the policyholder dies during the policy tenure, then the insurance amount is given as a lump sum to the nominee.
A term insurance plan does not provide maturity benefits like traditional, money back or market-linked life insurance policies, but provide much higher coverage for a lesser amount.
5 Term Insurance Benefits
1. Term Insurance Plans Are Very Simple To Understand
Simplicity is one of the reasons for the growing popularity of term insurance. Term life insurance is a pure life cover that focuses on offering your dependents the sum assured in case you were to die. All you need to ensure that the premium is paid on time.
2. Term Insurance Plans Are Supremely Affordable
The premium for a term life insurance plan is as low as 0.1 percent of the total sum insured. Now consider this, we pay about 2 percent of the car’s present value as its premium. Moreover, online channels provide an extra discount on your term insurance premiums as compared to offline channels.
3. Term Plans Offer Much Higher Coverage Compared To Traditional Plans
The total sum insured for traditional, ULIP or endowment policies is about 7 to 10 percent of the yearly premium. So for example, if you buy one of the plans mentioned above for a yearly premium of Rs 20,000, you get a coverage of Rs 2 lakh which will barely cover your family’s expenses for a few months.
Meanwhile, a term plan offers a much higher sum assured so that you can leave your family and dependents enough money that they don’t go through financial hardship in your absence.
4. Term Plans Come With A Host Of Tax Benefits
While the primary reason for buying term insurance is securing your family’s future, you also get to save tax with them. Let’s look at its 3 term life insurance tax benefits.
Section 80C: Under this section, you can claim a deduction up to Rs 1.5 for certain investments and purchases, that includes the premium amount you pay towards the term life insurance plan.
Section 80D: This exemption is allowed on the premium paid towards health-related coverage like critical illness riders. You can claim deductions up to Rs 25,000 for the premium paid towards it.
Section 10 (10D): In case of term life insurance, this benefit can be claimed while claiming the pay out. The entire amount is completely exempt from taxes.
5. Premiums Are Locked For The Duration Of The Plan
When you purchase a term insurance plan, you are effectively locking the premium you will be paying this year, next year, and every other year till the end of the plan. And this is where it becomes highly beneficial for you if you start your term plan as early as possible when premiums are lower at the younger ages.
As discussed in the article, term life insurance has several benefits. It provides higher coverage for a lower premium, it’s simple to understand and comes with immense tax benefits. But before factoring in all the benefits, you should remember the core objective of insurance is protection and not savings. Unlike most life insurance products, term insurance remains true to this objective.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.