Why Term Insurance Is More Beneficial Than Other Types Of Life Insurance Policy?

Term life insurance rates are more affordable than whole life insurance because it offers protection for a predetermined time. The life insurance company is hoping it will never pay out because you will outlive the term and the policy will expire. Term coverage only protects you for a limited number of years, while whole life provides lifelong protection—if you can keep up with the premium payments. Whole life premiums can cost five to 15 times more than term policies with the same death benefit, so they may not be an option for budget-conscious consumers.

Compared to many different life insurance policies, a term plan unquestionably holds the most economical premium amount. Apart from this, one important thing that people must always bear in mind is that it is always better to invest funds in a term plan at an early age.

Why Term Insurance Is More Beneficial Than Other Types Of Life Insurance Policy?

Here are six factors that set term plans apart and why you too should opt for one:

• Return on Investment

There are many different types of insurance plans, each looking to serve a particular need of the insured person. An endowment policy focuses on the need to save the assured party along with maturity benefits, while Unit Linked Plans (ULIP) aims at wealth creation and tax savings. In comparison, a pure term cover safeguards the probable loss of income that can throw a wrench in the financial plans or debt fulfilment of the family.

While an endowment plan can provide some post-retirement income, it will not be enough to help repay a home loan or fund higher education. 

• Tenure

Most endowment and payback plans kick in after retirement (from age 55 to 65) to supplement the income. The insurance benefit ceases with maturity. Whole life insurance plans and term plans can be availed till the age of 100, but the premium for a whole life policy is higher than that of term plans.

A term plan continues to provide the same benefit even in your later years, securing the future of the generation to come.

• Term Insurance Premium

A term cover is the most affordable insurance plan. Depending on the maturity benefits, bonus and payout options, the premium on most other life insurance plans can be many times more expensive than a simple term cover. A term plan, however, comes at an absolutely affordable price, making it the ideal choice, especially for the youth.

• Coverage

The coverage provided by a pure term cover is unmatchable. For example, with some term plan, a young individual can avail a cover of INR 1 crore for approximately INR 365 a month. Depending on the income potential and future obligations, you can decide the amount of coverage that would be suitable.

• Flexibility

Term plans are very easy to acquire. A simple online form and a medical test in some cases are more than enough. If opted for at the commencement of the policy, you can increase the coverage in the future depending on your changing needs and goals. Surrendering a term policy is easy too. A policyholder can discontinue the payments, and the policy will lapse.

In case of insurance plans with maturity benefits, the policyholder may receive little to none of the benefits on discontinuation. In some cases, a part of the premium paid may be recovered after deductions.

• Term Plan Tax Benefit

All life insurance plans grant tax benefits under Section 80C up to INR 1.5 lakh. However, there are multiple investment products too that offer a deduction under the same section. Your decision to pick an insurance plan should not depend on tax benefits though.

A term cover provides death benefit at a much lower cost and still leaves a balance deductible value of more than 90% under Section 80C. The same can be used across other products such as pension plans, principal of home loan repayment, etc.

Conclusion

In today's time and age, life insurance is a necessity. A sound financial plan must have a combination of various Life insurance products. A term plan works best if you want to create a cushion of a large sum of money for your family for an affordable premium. Make an informed choice that suits your needs the best.

Also read: 

All You Need to Know About Different Types of Term Insurance Claims

Top 5 Benefits Of Term Insurance 

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.