Why Term Life Insurance is better than other kinds of Life Insurance
“Life is so uncertain that we can never know what might befall us the very next minute, or for that matter, the very next second.”
Every moment of life is precious, indeed. So, instead of trying to figure out possibilities that are not in our control, it is better to prepare ourselves well in advance for them. And the right way to do that is to invest in an insurance policy that would prove to be effective and fruitful, whenever an eventuality occurs.
While there are a plethora of insurance products available in the market today, life insurance policies are considered the most valuable. And among them, term insurance is the most sought-after.
What is term life insurance?
Also referred to as the “Pure Protection Plan”, a term plan is a type of life insurance policy that provides coverage for a definite period of time or a specified “term” of years. Within the policy tenure, if the insured dies, then a death benefit amount is paid to the nominee in the form of a lump-sum payout.
A term insurance plan is similar to other types of life insurance policies in many ways: –
- Like other life insurance policies, the sum assured received under a term insurance plan is tax-free under Section 10 (10D) subject to certain conditions.
- There are return-of-premium term insurance plans that generally extend over a period of 20-30 years. As part of these plans, if the insured outlives the policy, then, like in case of other life insurance plans, the insured gets the maturity benefit amount.
While there are many similarities between term insurance and other life insurance policies, investing in term insurance is a better option. Let’s understand this in detail by going through the benefits of term insurance over other types of life insurance: –
- Low Premium Amount: The premiums associated with term insurance plans are much lower as compared to the premiums of other life insurance plans. In fact, among all life insurance policies, term insurance has the most affordable premium. This is certainly not the case with other life insurance plans where you have to pay a high premium amount to obtain optimum coverage. Wherein, term insurance plans offer sufficient coverage at low premiums, enough to take care of your family’s financial needs even in your absence.
- High life cover and complete financial security for your Loved Ones: A term insurance plan comes with pocket-friendly premiums and offers complete financial security to your family. Unlike other types of life insurance policies that are available at higher premiums. Further, your term insurance cover should be approximately ten times of your annual income. If you want to get such coverage in other kinds of life insurance, then you will have to pay whopping premium amounts. This is the primary reason that about 75 percent of Indians are not able to buy traditional life insurance plans. And this problem gets addressed when you invest in a term insurance plan as the premium vis-à-vis the coverage offered is quite accessible.
- Flexibility: Another significant advantage of buying term insurance is the flexibility that you get to enjoy while the plan is in force. Surrendering the term insurance policy is much easier as compared to other life insurance policies. In the case of term insurance policy, if you stop paying the premium, you will no longer be able to enjoy the benefits. After that, your policy gets discontinued. While in the case of other life insurance policies, if you surrender mid-way, you will not be able to recover the entire saving portion of the policy. You will only receive the premium amount that too after certain deductions, which will result in a significant loss since you have paid exceedingly high premiums earlier. Furthermore, term insurance plans are renewable and can be converted into other life insurance policies such as endowment policies (with/without profit) at any given point of time. However, doing vice-versa isn’t possible, i.e. you don’t have the choice to convert your life insurance plan into a term insurance plan.
- Tax Benefits: It is a common misconception among the general public that the high premiums paid towards life insurance policies are the only ones that are subject to deduction under Section 80C of the Income Act of 1961. On the contrary, a term insurance plan with relatively lower premiums in comparison to other types of life insurance plans, also offer tax benefits on the premiums paid. Thus, you don’t have to buy high-premium life insurance policies, simply to get a tax benefit as you can get the same benefits by investing in low-premium term insurance plans.
Citing the benefits mentioned above, it is right to state that you can rely on a term insurance plan for the future security of our beloved family. The key is to find the right policy that covers your current expenses, on-going financial liabilities, and estimated future costs. To get quotes for term life insurance, you can visit BimaKaro.in and submit your details.