What is Term Insurance and Why is it so Important?

Term insurance plan is a life insurance policy which offers you financial coverage in case of loss of life during the term. You pay a yearly premium against the policy to the insurance company. This policy gives death coverage to the policyholder and offers the sum assured to the family or next of kin. The term insurance policy offers high coverage for a low premium. This plan ensures that the future of your family is safe even after your demise.

A term insurance plan and a life insurance plan differ slightly from one another. A term insurance policy offers the sum assured to the nominee of the policyholder if the policyholder dies within the term. There are no maturity benefits in a term insurance plan. In case of a life insurance plan, the process of offering the sum assured to the nominee in case of the policyholder’s loss of life is the same. However, if the policyholder survives the term, there are certain pre-decided maturity benefits. But a term insurance plan is more economical than a life insurance plan.

Types of Health Insurance:

Level Term Insurance: This is the term insurance plan which is popularly chosen by people. The key to this plan is that the life cover and premium which you choose at the time of buying remains the same during the entire term of the policy. This type of cover is provided invariably by all life insurance companies. The nominee receives the benefits upon the death of the policyholder during the term. You must compare the term plans before finalizing one.

TROP: Some insurance companies offer the option of TROP. A TROP is a term plan with an option of return of premium. This means that when your policy matures and there is no claim made, you are returned all the premium that you have paid over the years. So, you don’t feel like your money has been invested wastefully in a term insurance plan. This is an add-on benefit which you can choose for an additional amount to your premium.

Here’s why experts advise investing in the term insurance plans early in life:

Securing Your Family’s Happiness: If you don’t buy term insurance, you are leaving your family vulnerable. If you die early then they would have to face financial hardship. Your family members might be financially dependent on you. You wouldn’t want them to compromise on their dreams along with dealing with the grief of your passing. Also, if you have any loan – automobile loan, student loan or even credit card debt – your family members will have to pay for it. This might put them under more financial pressure.
Tax Benefits: Here are the 3 tax benefits you enjoy from term plan:

Section 80C: Under this section, you can claim a tax deduction for the premium amount that you pay for the policy. Section 80C is the biggest tax deduction pool and under this section, you can claim a deduction up to Rs 1.5 for certain investments and purchases.

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): The nominee can claim this tax benefit while claiming sum assured in case of the death of the policyholder. The entire amount is completely exempt from taxes.

Multiple Payout Options: An online term insurance plan offers you the flexibility to choose the policy’s payout options. If you expire during the term, a lump sum amount will be offered to your family. You also get the option of choosing a monthly payout option. Through this feature, your family will receive a monthly amount for their sustenance along with a lump sum money.
Additional Benefits: A regular term insurance plan only offers you death benefit during the tenure of the plan. But several plans offer the flexibility of opting for riders such as critical illness cover, accident cover, etc. You can purchase these riders, at an addition to the premium, at the time of purchasing your term insurance policy.

Term insurance is a must-have in today’s day and age. It is wise to invest in it as early as possible and make a term plan comparison when choosing one.