If you are reading this blog, it means that you are a person with a good interest in finance. It must be appealing to traverse the developing marketplace of personal finance and insurance. Anyhow, amid this progressing marketplace, term insurance plans have grabbed the attention of individuals as a basic component of financial planning.
As the fintech industry continues to progress with innovation, reshaping traditional practices, individuals must understand the ins and outs of term insurance.
Through the medium of this blog, let’s investigate the key aspects and benefits of term insurance plans. It will shed light on their significance in our contemporary financial world.
Understanding the Basics of Term Insurance Plans
Term insurance plans are designed to create a safety net around one’s family in the event of their unfortunate demise during the policy term. It provides the family with a death benefit, which is a guaranteed sum payable to the family to help them manage the financial consequences after the untimely demise of the breadwinner of the family.
These plans are pure life insurance products that provide coverage for a specified term or duration. Unlike other types of life insurance, such as whole life or endowment plans, term insurance plans do not have a savings or investment component.
This type of plan comes into effect only if the insured passes away during the duration of the policy; in case they survive the term, no monetary benefit is given if one has opted for the basic term insurance plan. The fact that a term insurance plan only provides the death benefit makes it the most affordable type of life insurance in the market.
If you are seeking returns from term insurance plans, you can choose The Return of Premium (TROP). It is a type of term insurance plan in which the policyholder receives a survival benefit if they survive the policy period. The survival benefit is the total of the premiums that are paid by the policyholder to the company. This sum is repaid to the policyholder as a survival benefit.
10 Key Features and Benefits of Term Insurance Plans
- Affordability and Cost-Effectiveness: Term insurance plans are known for their cost-effectiveness. Since they lack a savings component, premiums are lower compared to other life insurance plans. This lower price makes these plans accessible to a broad range of individuals.
- Pure Protection: Term plans offer pure life coverage without any cash value or investment element. This simplicity ensures the entire sum assured is paid out to the beneficiaries in case of the policyholder’s death.
- Flexible Policy Terms: In these insurance plans, policyholders can choose the coverage duration based on their needs. Common terms range from 10 to 30 years, which allows individuals to align the coverage period with their financial obligations.
- Customisable Riders: Term insurance plans often come with additional riders or add-ons that can be customised to enhance the coverage. Some basic examples may include critical illness riders, accidental death benefit riders, and more.
- Income Replacement: These plans provide a crucial income replacement function. It means that in the event of the policyholder’s uncertain death, the sum assured can act as a financial cushion, replacing the lost income and helping the family maintain their standard of living.
- Tax Benefits: It is important to note that premiums paid for term insurance plans are eligible for tax deductions under Section 80C of the Income Tax Act. Additionally, the death benefit taken by the beneficiaries is usually tax-free under Section 10(10D), making term insurance an attractive tax planning tool.
- No Medical Exam Policies: Some insurers offer term insurance plans without requiring a medical examination, especially for younger individuals. While premiums for these policies may be slightly higher, they provide a convenient option for those who may find the medical underwriting process cumbersome.
- Conversion Options: You can find various convertible term insurance plans which allow policyholders to modify their term policy into a permanent life insurance policy without the requirement for a medical exam. This feature is beneficial if your financial circumstances change and you require a more comprehensive insurance solution in the future.
- Accelerated Death Benefit: Certain term plans come with an accelerated death benefit rider, which permits the policyholder to receive a part of the death benefit if diagnosed with a terminal illness. It can help cover medical expenses and improve the policyholder’s quality of life during their challenging time.
- Coverage for Critical Illnesses: Some term insurance plans offer coverage for critical illnesses as an add-on or built-in feature. In the unfortunate event of being diagnosed with a severe illness like cancer, heart attack, or stroke, the policy pays out a lump sum to cover medical expenses and additional financial burdens.
Secure the Best Term Insurance Plan Today
As the fintech industry continues to reshape the financial services marketplace, term insurance plans have become more accessible, affordable, and customisable. Understanding the intricacies of these plans is essential for anyone seeking comprehensive financial protection.
Take the time to assess your needs, research and compare different policies, and consult with insurance experts to find the right term insurance plan for you. To begin with, you can connect with the best term insurance plan providers, like TATA AIA. They offer you a ₹1 crore term life cover with just an investment of ₹547 per month*.
Visit their website to understand the full range of term plan benefits, including comprehensive nominee protection, to make a prudent insurance investment decision for your family’s well-being.
