Investing in a Term Life Insurance – Is it a waste of money or a boon for you?
Many individual might believe that investing in term insurance could be a waste of money as there is no maturity benefit involve with it. But some feel that it is a must-have form of insurance in today’s world to secure a family’s future financially in their absence. Then what is the right notion? Well, its solely depend on an individual’s beliefs and perceptions. However, looking at the rise of uncertainty in the present lifestyle, term insurance policy is important to include in your financial planning.
Let’s discuss the benefits of buying term life insurance to understand its importance in a better way.
High life cover at low premiums: This is among the prime benefits of term insurance due to which people usually prefer investing in it. Term plan provides a substantial life coverage at reasonably low premiums that need to be paid for a fixed period. The earlier you buy a term plan; lower the premiums you will get.
Tax benefits: The premium paid towards the term life insurance plan is subject to tax exemption under Section 80C of the Income Tax act. The claim amount that the dependents receive is also eligible for tax deduction under the provisions of 10 (10D) of the Income Tax Act 1961.
Flexible payout option: There are different payout options in term insurance that you can select. You can either opt for lump-sum, monthly or partial payment option to pay the sum assured amount to the beneficiary of the policy. This helps your family to manage their expenses in your absence.
Simple to understand: Term Insurance is easy to understand. It’s a pure protection plan without any investment component. You simply need to pay the premium against the life cover for a specific tenure. In case of the policyholder’s demise within the policy tenure, the beneficiary of the policy receives the insurance coverage amount.
Riders: Term life insurance lets you enhance your base policy by adding various riders with the addition of a nominal charge in the premium. For instance, if you opt for Waiver of Premium (WoP) rider, it allows the policyholder to stop the premium payment if he or she suffers from any critical disease or dismemberment. In such cases, the policy will not expire, and your life cover will continue. The other popular riders are critical illness rider, accident benefit rider amongst others.
Now let’s explore how term life insurance is different from the money-back policies.
Term life insurance is a cost-effective form of life insurance wherein the premium is paid against a sum assured for a fixed period of time. Term plans offer high life cover at affordable premiums. This coverage amount is the death benefit amount given to the nominee of the policy, in case the policyholder passes away within the term of the policy. The affordability of term life insurance lets you make other investments also, keeping your budget intact. However, it does not provide any maturity benefit, and thus known as a pure protection plan.
While traditional or money-back plans have quite expensive premiums as compared to the term plans. The premiums collected could be for a specific term or throughout the life of the policyholder. These plans offer maturity benefit, which means the sum assured gets paid to the policyholder after policy tenure gets over.
So, what should you opt for?
If you are in your early 30s, investing in a term life insurance is the best thing that you can do to secure your family’s future. Due to the fact that term plans offer decent life coverage against a reasonable premium amount. Moreover, if you have any health issues, term plan covers that as well with the help of various riders.
If you are married and have kids, in such case a combination of term plan and whole life insurance would be ideal. As through the whole life insurance, you get a payout at various stages of your life and in term plans your dependents are financially protected in your absence.
Therefore, you should always opt for a life insurance policy depending on your needs and requirements. Though buying a term life insurance at an early age is the best bet that you could make; still, you should carefully think through before making any decision. To know what is right for you, visit BimaKaro.in, which offers various term insurance policies from top insurers as per your every life stage.