Why you Must Have a Term Insurance Plan?

In a time like this, when the whole world is affected by the pandemic and while there is no solution available immediately, there is no need to panic or fear. To stay secure during a time like this you must protect yourself and your family both physically and financially. The best way to provide financial protection to the family is to have a term insurance plan.

The term insurance plans are a protection plan, which is specifically designed to provide the right financial security to the family of the insured in case of any emergency. Nowadays, having a term insurance plan by your side has become more crucial than ever. To ensure that your family has the right financial backup make sure that you purchase higher life coverage, for example, a 1 cr term insurance plan keeping in mind the rate of inflation in the future.

Let’s read further to know why you must have a term insurance plan.

Minimal Cost

Term insurance is one of the simplest and basic financial products. There is no investment and savings component in term insurance. This makes term insurance more affordable and cheaper as compared to other life insurance products. As there are only death benefits offered under the term insurance plan it offers a lower premium rate. Thus, you can secure the financial future of your loved ones without burning a hole in your pocket.

Financial Security

Most of the individual often makes the mistake of underinsuring themselves, which means that even people who have insurance do not have the required cover. The sum assured is an important factor in determining the premium amount you will have to pay for the policy. With a term insurance plan, you can provide the right financial security to your loved ones and ensure that they live a good life even in your absence.

While purchasing a term policy, the buyers have the advantage to choose a higher coverage of 1 cr term insurance or more in exchange for the minimum monthly premium of Rs.800 or less. By purchasing a higher coverage you can make sure that you provide ample protection for your family in the long-term.

Fixed Premium

As a pure protection plan, the main objective of term plans is to provide financial security to the family of the insured for a specific tenure. The premium amount or sum assured amount is not indexed to the market, this makes the term plan a stable insurance product. Once the application process is completed the premium of the policy remains the same throughout the tenure of the policy.

Simple to Understand

As a basic insurance product, understanding the process of term insurance is no rocket science. In simple terms, in the term insurance plan, a fixed amount of life coverage is offered by the insurer to the nominee of the policy as a death benefit in the event of the uncertain demise of the insured person during the policy tenure. The policyholder just needs to make sure that all the premiums of the policy are paid on time. As a pure protection plan, there is no maturity benefit offered under the plan.

Income Tax Benefit

This is another reason why you should consider having a term insurance plan. Along with the benefit of providing insurance coverage to the family of the insured it also helps you to save on taxes. The policyholder can claim tax exemption U/S 80C of the Income Tax Act for the premium paid towards the policy up to the maximum of Rs.1.5 lakh in a financial year. Moreover, the sum assured amount paid to the nominee is also tax-free under section 10(10D) of the Income Tax Act.

Higher Coverage

This is one of the major advantages offered by the term insurance plan. In the case of ULIP or endowment policy, the sum assured amount ranges up to 7%-10% of the annual premium. So, if you purchase a ULIP or endowment plan for an annual premium amount of Rs.20,000 then you will get coverage up to Rs.2 lakh, which will result in your family being underinsured.

However, in the term insurance policy, you can avail of coverage up to Rs.1 crore with a yearly premium of Rs.10,000. The coverage amount offered by the term insurance plan is 60 times higher than the traditional life insurance policies.

Wrapping it Up!

With the above-mentioned points, it can be clear that why you must have a term insurance plan. however, before making an informed choice make sure that to go through the various aspects of it and choose the best plan as per your requirement and suitability.

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