Here’s Why Term Insurance Should Be Your Top Priority

Oct 27, 2022

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Covid-19 has shown us how uncertain life could be. Many of us have lost our family members and friends during the horrific covid-19 period. While the threat of covid-19 has reduced, life's uncertainty remains the same. In the back of our minds, we all, especially those who are the family's sole breadwinners, think about our loved ones' financial safety in our absence. We all are aware that the only thing that can financially protect our family when we will no longer be available is life insurance. This is why life insurance is an important investment, as it compensates against financial loss suffered in case of the unfortunate demise of the breadwinner. While several types of life insurance plans are available in the market, term insurance or term plan is the purest form of life insurance that provides maximum coverage at an affordable premium. This article elucidates why a term plan should be your top priority amongst other financial plans.

Term Insurance is basic life insurance that provides coverage for a certain period called 'term'. In case of the insured's demise, the term insurance provides financial coverage to the nominee. The policyholder is required to pay the premium for the chosen term, and failing to pay the premium on time can result in a policy lapse. The term insurance premium largely depends upon the policyholder's age, sum assured, and the policy term. The policyholder's location, health, profession, lifestyle habits, and medical history are also considered while calculating the premium.

Term Insurance offers the sum assured to the nominee in the form of a death benefit in case of the unfortunate demise of the insured within the policy term and under the circumstances covered in the policy. Since the sum assured is given to the nominee, the policyholder is not a beneficiary of this type of insurance. If the policyholder survives the policy term, he/she gets an option to renew the policy with a new term, but the premium calculation is done considering the age and health conditions at the time of renewal.

While traditionally, there are no survival benefits with term insurance, nowadays, many insurance companies have started offering plans with ample benefits. You can buy suitable riders and add-ons and convert your basic term plan to a customised insurance plan.

Here's why term insurance should be your top priority:

1. Financial security for your loved ones:

Term life insurance provides financial security to your family so that they can continue living their life without compromising on their life goals when you are no longer around. This amount can help your family achieve their goals, such as a child's education, a spouse's retirement, buying a house, etc. If you have any unpaid loans, your family does not have to stress arranging funds or selling off their assets as a part of the sum assured can be used to repay any unpaid dues. The plan allows you to choose the sum assured based on your income and expenses. Meaning you can choose the highest amount you are eligible for your income and age, which would otherwise take years to save.

2. Affordable Premiums:

The premiums of the term plans are quite affordable compared to other life insurance plans. It means you can buy a high coverage to cover your family's financial needs at a nominal premium. These plans are available at affordable premiums because there is no investment element. As discussed, there is no maturity benefit or survival benefit offered by term plans unless you have specifically opted for one that does.

Here’s Why Term Insurance Should Be Your Top Priority
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3. Suitable riders to choose from:

While buying a policy loaded with all the benefits is convenient, it unnecessarily increases the premium for the extra features you might not need. The riders and add-ons let you customise your policy to your requirements. It provides you with comprehensive coverage towards the specific areas you find are highly-risky considering your lifestyle. The premium increases only in accordance with the riders you choose to pay for. Some of the popular riders and add-ons are Accidental Death Benefits, Waiver of Premium, Critical Illness, Accidental Disability, Return of Premium, Family Income Benefit, and Guaranteed Insurability.

4. Customisation as per your requirements:

Every individual has unique needs and requirements, and term insurance is no exception to this. Our requirements for a life insurance plan change with different life stages. The amount of coverage you need when you start working differs from the coverage you need after getting married or having kids. The term plans allow you to increase or decrease (in case of the demise of the dependent) your coverage as per changes in life stages. Apart from this, you can also opt for a return of a premium term plan, monthly income payout term plan, etc., depending upon your needs.

5. Impact of Increasing Age:

Buying a life insurance policy at an early stage when you are young and healthy is the best way to get maximum life coverage at a lower premium. The premium remains the same throughout the policy term. But as you age, you are more susceptible to illnesses and other ailments, which is why the risk of life insurance companies paying the sum assured also increases. It ultimately results in an increased premium with each passing year. Therefore, it is advisable to buy a term plan as soon as you start earning.

6. Tax Benefits:

You can avail of annual tax deductions of up to Rs 1.5 Lakhs per financial year under Section 80C of the Income Tax Act 1961 for the life insurance premiums you pay. Besides, if the premium is not more than 10% of the sum assured or the sum assured is at least 10 times the premium, Section 10(10D) of the Income Tax Act makes the maturity benefit entirely tax-free.


7. Peace of Mind:

With the right insurance coverage, your spouse and other family members can live a proud life without being dependent on anyone, even in your absence. Buying a term plan early and ensuring your family is covered with sufficient coverage brings the ultimate peace of mind to the insured.

To conclude:

Buying a life insurance policy for the first time could be overwhelming. As discussed, term insurance offers several benefits that one must get from a life insurance plan. Buying early will help you get the policy at a lower premium and secure your family financially in uncertain times.

Many individuals opt for investment-cum-insurance that neither provides sufficient coverage nor generates attractive returns. But buying sufficient coverage of the term plan and investing the saved amount in carefully selected equity mutual funds can be the best way to get maximum coverage while generating inflation-beating returns from mutual funds investment.

Ensure you carefully read and understand all the features, benefits, terms & conditions, inclusions and exclusions, policy exemptions, etc., to avoid any disappointments and disputes in the future.


Warm Regards,
Ketki Jadhav
Content Writer

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