Given growing prices, changing lifestyles, and an increase in critical illness cases, knowing what is term insurance should be the first step in financial preparation. You may wonder how this helps.
To better comprehend this, let us first define term life insurance and explain how it works.
What is Term Insurance?
If you’re wondering what is term insurance, we’re here to assist. Simply put, term life insurance is an agreement between the policyholder (insured) and the insurance company in which the insurance company pays a certain amount to the insured person’s family in the event of the policyholder’s untimely death. When it comes to long-term financial planning, term plans will come in handy.
When learning what is term insurance, it is important to remember that term insurance is the simplest kind of life insurance coverage that provides full financial protection to your family members from life’s uncertainties.
Your family will get life insurance or a sum guaranteed based on the term insurance plan you choose if you die during the policy period. Please tell us more about term insurance and the many features and advantages it provides.
How Does A Term Plan Work?
A term insurance policy is a form of life insurance policy that compensates the beneficiary in the event of the death of the person guaranteed during the policy’s term. In the event of the life insured’s untimely death within the policy term, an amount promised known as the death benefit is paid to the nominee/family of the life assured.
Term insurance is the most basic kind of life insurance, and it assists a person in financially protecting their loved ones in their absence. Term insurance policies are inexpensive; a person may get a large quantity of coverage at the lowest possible costs.
Term insurance plans are popularly recognised as pure protection plans that give a death benefit in the event of the life assured’s untimely death within the policy duration. Some term insurance plans give a maturity reward if the life guaranteed survives until the end of the policy term.
Tax advantages are available under Sections 80C and 10(10D) of the Income Tax Act of 1961 for term insurance plans. A term insurance policy enables a person to provide a financial cushion for their loved ones, allowing them to pursue their aspirations or meet their financial obligations in the event of the life assured’s death.
Why is Term Insurance Considered as a Smart Investment?
Now that you know what a term life insurance policy is, you should properly comprehend what it means for your loved ones by researching the features and advantages of term insurance policies. The following are some of the most important term insurance advantages and characteristics.
1. Cover Against Eventualities
If you are your family’s primary income, you may help protect your loved ones from financial setbacks by knowing what is term plan early in life to ensure a worry-free financial future for your family. Under these term insurance plans, you may quickly get a substantial life insurance policy for a relatively low price.
2. Provides Add-on Riders
You may add riders to your term insurance plan after you understand what is term insurance and have decided which one to purchase. Riders allow you to extend the advantages of your insurance by paying an extra premium and getting comprehensive coverage, and they fulfil this function effectively.
3. Provides Cover for Critical Illnesses
In your twenties and thirties, you may believe that you will never suffer from a catastrophic disease such as cancer or renal failure and so ignore the purpose of term life insurance.
However, if this occurs, not only will your health suffer, but you may also lose your hard-earned cash in order to get the essential therapy. Although the standard term insurance plan contains a death benefit, you may supplement their coverage with a critical illness rider.
A critical illness rider, as the name implies, provides additional benefits when attached to your term insurance policy. For example, if you are diagnosed with an illness covered by the rider, a lump sum amount is paid to you to avoid any financial setback that your family may face while receiving treatment.
4. Cover for Accidental Death or Disability
Accidents can happen at any time and in any place. Depending on the severity, you may need a large sum of money to cover medical expenditures and compensate for lost income.
Understanding what is term insurance and investing at the right moment will help you deal with such scenarios as accidental death or disability rider.
5. Offers Tax Benefits
As taxpayers, you may be wondering what term insurance tax advantages are. You may get tax breaks on term insurance premiums if you use Section 80C of the Income Tax Act of 1961.
On the premium paid, you may claim tax advantages of up to Rs.1.5 lakh. Not only that, but with critical illness insurance, you may get further tax breaks on premium payments under Section 80D of the Income Tax Act of 1961.
6. Include Multiple Payout Options
If you believe your family members lack the requisite knowledge of managing big sums of money and will struggle to use a lump sum amount received under your term insurance policy, you may pick from a variety of payment choices.
7. Return of Premium Option
A pure term insurance policy solely covers the beneficiary in the case of the life insured’s untimely death. It offers no advantage in terms of maturity. However, if you choose the return of premium option, you may get a maturity benefit under a term insurance policy.
This choice will require you to pay greater premiums, but if you survive the policy term, you will get a refund of the whole premiums paid. However, the total premium amount to be repaid excludes any taxes, levies, rider premium, and modal amount paid on the premium.
Wrapping It Up
There are many different types of term insurance policies available on the market, each with its own set of advantages. However, when contemplating term insurance benefits, it is best not to take a one-size-fits-all approach.
Check out the iSelect Smart360 Term Plan of Canara HSBC OBC Life Insurance that offers the return of total premiums paid in case of no claim that will help you in fulfilling the needs of your loved ones.
You should get enough life insurance coverage depending on your financial responsibilities and pick suitable add-ons based on the kind of coverage you need. Before purchasing a term insurance policy, ensure that you are aware of and comprehend the many aspects associated with obtaining term insurance plans online or offline.