People purchase life insurance to secure the lives of their loved ones in their absence. There are several types of life insurance to choose from, depending on one’s individual needs. One type of insurance that has been gaining popularity lately is term insurance. A term plan is simple life insurance where the policyholder gets a life cover for a fixed period. Within the period, if the policyholder loses their life, the nominee will receive the sum assured. However, if the policyholder survives throughout the term insurance period, there are no maturity benefits or payouts.
A term plan is designed in a manner where one can get an enormous sum assured by paying low premiums. Here are some benefits of term insurance that make it a must-buy:
- Easy to understand
Term insurance is a simple type of insurance with no savings or investment component attached to it. Life insurance policies that have these components are complicated to understand. While the meaning of term insurance is simple, a life cover for a fixed period. There are no complicated components and risks attached to a term plan.
- Affordable instrument
One of the significant advantages of a term plan is its affordability. If you compare it with other types of insurance, you will find it has comparatively low premiums for the same amount of cover. It is designed for a fixed period and made available to consumers affordably so everyone can have life insurance with ease. Earning individuals have to cater to everyday expenses, responsibilities and plan investments for their future. With so many financial commitments, paying hefty premiums is difficult for most individuals. Therefore, most people prefer to buy term insurance as they can get their desired sum assured at an affordable premium
- Quick payouts
Since term insurance is a simple type of insurance, the payouts are faster compared to other types of life insurance. Having timely payouts is one of the biggest advantages. Any policyholder wants the assurance that, in case of their sudden demise, their families can survive with ease. A quick payout ensures a hassle-free process where the payment is received as quickly as possible.
- Provides huge coverage
Term insurance is one of the most affordable types of life insurance as it provides huge coverage for low premiums. Premiums are considerably low as it is a type of basic insurance involving no maturity benefits or return on investments. Using a term insurance calculator, you will get an estimate of the premiums you have to pay to get your desired sum assured. These premiums can be paid on a monthly basis as well throughout the tenure. Whatever premium amount is decided during the purchase of the policy, it stays the same throughout the tenure. The monthly premium can account to be as low as Rs.500 every month.
Since there are no external components attached to term insurance, it is quite easy to opt out of the policy when you want to. One can opt-out by simply informing their insurer that they do not need their term plan anymore. Once the policyholder has stopped paying the premiums, the risk cover provided by their policy also ceases to exist. Also, there are several term insurances where you can choose to renew your policy after the tenure ends. Also, some term plans allow you to convert your policy into any other policy of your choice.
- Tax benefits
When you choose a term plan, use a term insurance calculator online to get an estimate of the premiums on your term plan. The premiums that are payable for your term insurance are all exempt from taxes under section 80C of the Income Tax Act. Also, the sum assured that is received by a nominee after the policyholder’s demise is also exempt from taxes.
The above benefits have made several policyholders choose term insurance over other types of insurance. Since the premiums are affordable, adding riders to the base plan of term insurance also becomes easy. There are several term plans available online and offline. It is important to compare and then choose the best one. Remember to read the fine print and know the terms and conditions of your term plan before purchasing it.