Why You Need Term Insurance

What Makes Term Insurance a Must-Have

The need for term insurance stems from the coverage it offers.

 

1. Term insurance basics

Term insurance is the one of the easiest type of life insurance to understand. You pay a premium based on the coverage you want and your risk factors such as age, policy term, pre-existing health conditions or lifestyle habits etc, In the event of the life assured's death, the nominee gets the sum assured amount as promised.

The reason it is so affordable is because you are paying towards the insurance cover only. There is no maturity benefit under the plan. However, some life insurance companies offer return of premium on term plans, but such plans are relatively expensive.

 

2. Get higher coverage for less

Term Insurance can easily be worked into your budget due to its low premiums. This is because the younger you buy a life cover, the lesser the premiums are. Insurance premiums are linked with age, hence it is always advisable to buy a life cover at a young age when you are fit and healthy. Even small adjustments in your daily routine expenses can provide you an adequate premium for a term insurance. For instance, an Irani chai costs approximately ₹ 15/-. One won't even think twice about taking two breaks to go have chai at the corner tapri. This would set one back by ₹ 30/- a day.

 

3. Tax Benefits

The premiums paid towards term insurance are eligible for deduction up to ₹ 1,50,000 under Section 80C (only under the old tax regime) of the Income Tax Act, 1961 subject to provisions stated therein. The death benefit/sum assured received from the plan is also tax-free for the nominee.

 

Key Takeaways

1. Term insurance plans are protection-oriented life insurance plans that cover the risk of death during the policy tenure.
2. You can purchase term insurance plans to benefit from their comprehensive coverage at affordable premiums , helping secure your family’s financial future in your absence.
3. After your demise, your family can use the death benefit to meet their lifestyle needs, fulfil financial goals, and even repay outstanding debt.
4. Term insurance plans also offer tax benefits on the premiums paid and the policy benefits received.

 

Conclusion

A term insurance plan can be a valuable tool for providing financial security to your family in case of your untimely demise. The sum assured can help meet your family’s financial needs. The premiums of term plans are affordable and you can also claim tax benefits on them under Section 80C of the Income Tax Act, 1961 under the old regime.

 

FAQs

 

1. Why is term insurance important for financial planning?

A term insurance plan covers the risk of death during the policy tenure. The death benefit from the plan can provide financial security to your loved ones.

 

2. Who should consider buying term insurance?

A term insurance policy is suitable for every individual who has financial responsibilities and dependents. In the event of the life assured’s untimely demise, the death benefit from the policy can help the dependents cover their financial expenses.

 

3. Can term insurance protect my family’s financial future?

Term insurance can help protect your family’s financial future by providing a payout to your nominees in case of your demise during the policy term. This amount can be used to support living expenses, loan repayments (if any), and long-term financial needs.

 

4. What can be a sufficient coverage amount for me?

The coverage depends on your income, expenses, number of dependents, existing assets and liabilities, and other factors. Ideally, 10-15 times ¹your annual income can be a good coverage amount.

 

5. What are the benefits of buying term insurance at a younger age?

You can enjoy lower premiums when you buy term insurance at a younger age, as premiums generally increase with age.

 

6. Does term insurance only pay out after death?

Regular term plans only pay a death benefit if the life assured passes away during the policy tenure. However, if you choose return-of-premium plans, you can get the paid premiums refunded if you survive until maturity.

 

7. How is term insurance different from other life insurance policies?

Term insurance is primarily intended to provide financial security in the event that the life assured passes away. However, other types of life insurance plans provide life insurance coverage and can also help you save with a maturity benefit.

Source

1. https://www.etmoney.com/learn/insurance/how-much-term-life-insurance-cover-do-i-need/