Five Important Benefits of Buying Term Life Insurance

 Having a term insurance plan is one of the most important financial decisions that you can make. It secures your family's future and enables you to reduce the taxes you pay.

In this Article, we will look at the many benefits of term insurance & tell you some tips on how to get the most out of the money you spend to get this cover.

To buy term insurance plan from top insurers without any paperwork

Not only is term insurance the least expensive insurance out there but to add a cherry on top of the cake, most insurance companies on online platforms like ETMONEY offer an extra discount on your term insurance premiums as compared to offline channels. Do make sure you take advantage of this and further lower your term insurance premiums.

Benefit 2 – Term Insurance plans offer a much much higher coverage as compared to traditional or ULIP plans In traditional or unit-linked plans, the coverage offered is generally 7 to 10 times the premium you pay. 

If you pay a yearly premium of 20,000 rupees – you can expect about 2 lakhs rupees of sum assured. 2 lakhs of sum assured is too low a coverage and might cover only 3 to 5 months of your family’s expenses

On the other hand, term insurance plans offer much higher sum assured so that you can leave your family & dependents with enough money so that they don’t go through financial hardships in your absence.

Let’s put some numbers behind it. 

On ETMONEY, the average sum assured of a term insurance policy is a little over 1 crore rupees which comes to an average premium of 17,000 rupees. This 1 crore sum assured is about 60 times of the sum assured I would have received in a regular traditional, moneyback, endowment or ULIP plan Net net, term insurance plans offers high life insurance coverage at very low premiums

  • Benefit 3 – Term insurance plans are super simple to understand. Simplicity is one of the reasons for the growing popularity of term insurance plans. Term insurance plans are pure life covers that focus on offering your dependents the contracted sum assured in case you were to die. You simply need to ensure that you have been paying the premium promptly.

  • Benefit 4 – Term insurance plans offer immense tax benefits

There are three types of tax benefits that term insurance plans offer

1. Benefits under Section 80C allows an exemption for life insurance premiums of upto 1.5 lakh per annum. 

  • 2. Benefits under Section 10 (10D) which pertains to the death or maturity benefits that are payable under the policy. This section directs all insurance benefits payable to be fully exempt from taxes which means your beneficiaries will get the entire coverage upon your death and no taxes will be deducted

  • 3. Benefits under Section 80D which allows an exemption to that part of the premium that is paid for health-related coverages like critical illness riders which can be added with a term insurance plan.

Remember, tax laws change often so it is wise to be on top of this and consult your tax advisor for greater details

  • Benefit 5 – The premiums of term insurance plans are locked for the duration of the plan

It is surprising how many consumers don’t know this but when you purchase a term insurance plan, you are effectively locking the premium that you will be paying this year, the next year and every other year until the end of the term plan. 

And this is where it becomes highly beneficial and smart of you to start your term insurance plan as soon as possible when the premiums are lower for younger ages.

Let’s do some math.

If one were to take a 1 crore term plan at the age of 30 years, the premium would come to approximately Rs.10,000 for a plan that provides coverage until 75 years of age. This means you’re paying 10,000 rupees every year for the next 45 years, totaling to 4.5 lakh rupees.

Let’s say, one were to procrastinate and decide to enrol for a term plan much later – say at the age of 45 years. At this age, the annual premium is going to be much higher at about Rs. 30,000 per year which means paying 30,000 rupees every year for the next 30 years which totals to 9 lakh rupees.

So figure this –

When enrolled to the plan at 30 years, one would have been covered for 45 years and the total premium outlay will be 4.5 lakhs

But you procrastinated And when you enrolled at age 45, you would have been covered for just 30 years but would have paid double the amount of premium in those 30 years at 9 lakhs rupees as compared to 4.5 lakhs if the plan was taken at the earlier age of 30.

Be smart about term plans and don’t wait any longer to enroll for one.

Ritika Nayak

let yourself be your first love 💓

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