December 13, 2021

Plan Your Future Well with 6 Benefits That a Term Policy Provides

Investing in a term policy is one of the most important ways a policyholder may choose to secure their future and those dependent on them.

Investments and insurance plans can be tedious and financially stressful to maintain in their ways, at times of inflation and recurrent increases in lifestyle costs; the premiums towards the same can be ill-matched to a person's insurance requirements or income capabilities.

Plan Your Future Well with 6 Benefits That a Term Policy Provides: eAskme
Plan Your Future Well with 6 Benefits That a Term Policy Provides: eAskme

Therefore the most crucial step is to build a smart insurance solution that enables policyholders to achieve their future financial goals and coverage needs.

A term policy can be a useful method to secure these solutions. Let us understand the fundamentals and features of a term policy.

What is Term Insurance?

A term insurance policy is made to effectively cover the needs of the insured and their dependents through an assured death benefit sum in the event of the policyholder's demise.

In India, a basic term policy is considered one of the most affordable means of securing one's future where premiums are low.

One can customize their coverage, add riders and choose payout patterns according to their needs.

Most importantly, a term policy can be a useful resource and a lifeboat for families undergoing financial distress without their primary income earner.

Let us take a closer look at the benefits it provides to understand what is term insurance in detail:

1. Affordable Premiums:

Term insurance is known for its affordability and simplicity.

It is a simple insurance instrument with premiums that can go as low as Rs 600 a month and is accessible to people from all income brackets.

However, one can supplement the benefits of these plans by availing of a plan that has a combined premium and tenure benefit, which often comes with an added reduction on premium costs.

Hence, those starting in their professional careers with limited finances can choose a term policy as one of India's most affordable plans.

2. Death Benefit Payout:

The amount paid to the beneficiaries as denoted by the policyholder is assured and handed over to the beneficiaries of the policy at the time of the insured person's passing.

If deemed fit for the beneficiaries, this payout can be customized into a staggered monthly income instead of a lump sum.

There are options available for prospective term policyholders to choose their payout method as the beneficiary may not find it suitable to receive a large influx of money and manage it as per the family's needs.

As per their requirement, they may benefit more from the lump sum being converted into a monthly, quarterly, bi-annual, or annual income.

3. Rider Benefits:

With a nominal amount paid over the existing premium towards the term policy, a policyholder can expect to secure the additional coverage provided under various riders that are made to protect the policyholder from situations apart from death.

There are riders available in term insurance for Accidental Death, Critical Illness, and Disability.

4. Tax Benefits:

Since lawmakers understand the universality of needing to secure one's future in the face of unforeseen emergencies; the premiums paid for a term insurance policy and the payout sum thus received from the same at the time of maturity is exempted from taxation under Section 80C and 10(10D) of the Income Tax Act, 1961.

Therefore, a term policy is an ideal choice of insurance and investment solution where the taxpayer can avail a tax deduction of up to Rs. 1, 50,000 from their net taxable income on account of the investment premiums they may have paid.

5. Return of Premium:

Since a standard term policy does not offer any maturity benefits, one can avail return of premiums in the event the insured lives beyond the policy tenure.

After policy completion, one can receive their premiums except for the taxes and additional rider costs.

6. Spousal Benefit and Coverage:

One of the unforeseen eventualities that a family must prepare for with the help of term policy is to ensure the primary earning member and have a means of monetary backup in their absence.

However, in families where both partners make an equal financial contribution or where one of the spouses is a homemaker, one can avail coverage for both under a joint term insurance plan.

This protects the family unit as a whole, with the added benefit of a single premium to be paid for both, with no change in coverage or death benefits.

Therefore the pursuit of planning well for a secure future can be completed by weighing one's needs against the features and benefits of a good term policy and purchasing it at the right time with due deliberation and research.

If you still have any question, feel free to ask me via comments.

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