What is Term Insurance?
What is Term Insurance? Well, this is a general question about which most of Urban Indians are still not aware. As per Wikipedia, Term Life Insurance is a form of life insurance that provides coverage against a fixed rate of premiums for a limited period of time. In case the insured dies within the term of the policy, then the coverage amount or the death benefit is paid to the beneficiary. And after the policy term expires, the policyholder can renew the term plan; however, he or she will not get the previous rate of premiums. Therefore, in such a scenario, the applicant can either forgo the insurance or get further coverage with different conditions and payments.
According to Max Life India Protection Quotient (IPQ) 2.0 survey jointly conducted by Max Life Insurance and Kantar IMRB, the Indian Protection Quotient is as low as 37. This means that Indians feel uncertain and under-protected while managing their financial future.
The survey also reveals that almost 70 percent of India’s population own life insurance policy, but in the case of term insurance, only 3 out of 10 people are investing term insurance. Out of which, 55 percent thinks that they have an insufficient cover. However, the good part is that the awareness around term life insurance has increased and is at 57 percent. There is a probability that with the increase in knowledge about term insurance policy; there might be more people purchasing term plan in the coming years.
Moreover, as IPQ degree is as low as 37, it is essential that all of us re-think about life insurance to protect our family’s future and the nation as well.
India Protection Quotient refers to the degree (on the scale of 0 to 100) on which Indians feel secured from uncertainties in future. IPQ is based on the attitudes, mental preparedness related to the future risks, ownership, and awareness about the life insurance product categories (Term, endowment and ULIP)
But why term insurance is so important?
The answer to this question is very simple. Nowadays, the chances of accidents and illnesses have rapidly increased, making our lives immensely unpredictable. Thus, experts suggest that every individual should invest in term life insurance to secure their family’s future financially in his or her absence, making their life smooth and comfortable like before. It is the most inexpensive form of life insurance offering high coverage as compare to other life insurance policies. Term Insurance policy does not provide any maturity benefit; rather, it provides death benefits to the beneficiary of the term plan.
In a term life insurance, the policyholder pays a fixed premium against a sum assured amount for a specific term. The insurance providers calculate the premiums of the policy based on the applicant’s age, health condition, income, and other factors. That is why insurance companies review the applicant’s health status through medical tests and then decides on the coverage amount and premiums.
Now let’s understand the features and benefits of term life insurance to know it in a better way.
Cost-effective: Term Life Insurance is a cost-effective way to secure your family financially in your absence as it offers high life coverage at affordable premiums. Term Plans does not have any investment element attached to it, and thus the premiums are much lower as compared to the other insurance policies. Hence, it is the most affordable form of life insurance plan that everyone can afford.
Different options for payout: While buying term insurance, you can choose either lump-sum payment, monthly or partial payout option, depending on the needs of your family. The choice you make determines the way they will lead their lives when you are not there. Therefore, you should select the option keeping in mind your family’s future needs and requirements.
Riders to enhance term policy: Riders are the add-on benefits that gives you extra coverage along with your base term policy. There are various types of riders available in your term insurance plans such as Critical Illness Rider, a Disability rider, Accidental death benefit rider, Waiver of premium rider amongst others.
Simple to understand: One of the interesting features of term life insurance is that they are simple and easy to understand as compared to other life insurance policies. A pure term insurance policy offers you death benefit and not the maturity benefit. For the insurance coverage amount, you pay premiums for a fixed tenure, and the insurance company provides the benefit in term of securing your family financially in case of your demise within the term policy duration.
Return of Premium: A pure term insurance plan does not provide any maturity benefit, which means that after the policy term gets over; you do not get the premium amount that you have invested. However, if you select the return of premium option, then you can get back the premiums if you survive the tenure of the policy.
Income Tax Benefits: The premiums you pay for the term life insurance are tax-free Under Section 80C of the Income Tax Act 1961, up to a limit of Rs.1.5 Lakh in a year. Also, the death benefit amount that is given to the dependants is wholly exempted from the tax under the provisions of Section 10(10D) of Income Tax Act 1961.
Overall, you must be aware of the product in which you are investing for such a long period. In the case of term insurance, the main objective of buying it is safeguarding your family’s future financially, in your absence. It will help if you are sure about your needs and requirements so that you can choose and buy the right term life insurance. You also need to be sure about the insurer reputation as you will be investing quite a significant amount from your hard-earned money and even for the easy claim settlement. Hence, it would be best if you do your research before making the buying decision. You can visit BimaKaro.in that offer various term plans from top insurers in the country. You can quickly get customised quotes as per your requirement, compare and then select the right one for the better future of your family.