Benefits of term insurance – Why buy such a plan?

Term insurance benefitsThere are many benefits of term insurance plan, one of them being providing financial security with lowest premium possible.

Infact, it is the only insurance plan which provide greater sum assured with premium that hurts no-one’s pocket.

For e.g.

HDFC life which has the second best claim settlement ratio and can cover your life for Rs.1 cr. with meager premium of Rs.10,928 (paid annually which also includes your service tax).

Want to pay monthly….!

No problem,

HDFC gives you flexibility in paying premium. With them you can pay your premium amount online:

Monthly, Quarterly, half yearly or yearly.

If you choose to pay monthly then your term insurance premium would turn out to be Rs. 928 which you would have to pay for next 40 years 🙂

Now how cool is that…

Cool

For a simple monthly premium which is not even complete Rs.1000 you have secured your life for a sum of Rs.1 cr.

What this means is, if an unfortunate event occurs and the insured dies within in policy term (40 years in the case above) then an insurance company would be liable to pay his family a sum of Rs.1 cr.

are you in

Buying a term plan can be the smartest decision one can make, as it takes all the risk and provides financial protection to the family of the insured even after him.

Now the question is…

How insurance companies afford to pay such a huge sum for such low premium..?

The answer to that is,

Term insurance is pure life cover plan meaning that there are No Maturity Benefits.

Thus if the insured survives the policy term then no benefits are passed by the insurer. But, it can’t get better than this as the insured survived this long.

Is your investment in Term insurance a waste….?

Is there any benefit in buying a term plan

No, not at all.

Do you ever consider investing in your life a waste…?

Buying a term plan is exactly like buying your car insurance. You pay for your car premium without even knowing whether you will get a chance to make a claim or not. But you still pay as this keeps you financially protected from any damage that might happen in future.

Term insurance also works on the same principal. It is meant to financially protect the family of the insured on his demise. Thus when buying a term insurance never ever have an investment point of view in mind as:

It is not meant to grow your money but to keep it safe.

Keep your money safe

With that said, here are the main:

Benefits of Term insurance plan in India…

Flexible Payment options:

As covered in the e.g. above, term insurance is highly flexible. You can find many companies that offer flexibility in paying premium. Thus choosing the option will entirely be in your hands. It will be you who will decide whether you would want to pay monthly, quarterly, half yearly or yearly.

Flexible Terms:

Not only premium but policy terms are highly flexible too. You can get a term insurance for a period as short as 5 years and sum assured as low as Rs.10 lac. This way you will financially protect your family for a premium that won’t be a burden on your pocket.

Minimize your risk:

Term insurance is a perfect tool to minimize your debt burden.

Minimize your risk

For e.g. you have taken a mortgage of Rs.50 lac then you can link that with your term plan of the same value. Thus in case if anything unfortunate happens then your insurer will pay off your entire remaining debt and there will be no financial burden on your family.

Can this be done….?

Yes, 100%.

There are many types of term insurance plans, one of them being Decreasing term plan. It works in line with your Debt.

Decreasing term plan was introduced keeping in mind that people usually buy insurance to pay off their debt. They always remain concerned, who will pay if they were not able to pay it off in their life.

This is where (decreasing) term insurance comes into play. It keeps your debt in line with the sum assured. When you cover a certain portion of your debt then even the sum assured also declines and this keeps you protected from your every financial obligation.

Pure Life Cover:

Since Term plan is a pure life cover plan thus your investments are not in any case mixed with your cover.

Pure life cover

This way you get all the financial freedom to invest as per your own needs, and this is what the biggest benefit of term insurance plan is.

As the plan is separated from the any investment proposal thus what you pay is only to cover your life and not for any unwanted scheme. And the result you get is in the form of lower premium.

Term insurance tax benefits:

Tax advantage

If you buy term insurance then you get tax benefits under section 80C and Section 10 (10D) under Income tax act 1961. You can save upto 20% of the sum assured as this premium will be eligible to be deducted from your gross total income. Thus if you pay premium then you save it on tax front.

Return your premium: (add on)

Still not convinced with the term insurance plans and consider them waste of money, then you should read ahead and you will see real benefits of term insurance.

Many companies today have come up with add-on facilities that plan to turn your insurance policy into an investment plan. Here your money will not necessarily grow but will not go waste either.

Return of premium is the add-on benefit that you can avail by paying a little extra in your premium. This add-on benefit promises to return your entire premium paid over many years at the time of maturity. Thus with this facility you not only get death benefits but Maturity benefits as well.

Cover for your Job: (add on)

These are again some extra facilities that you get out of investment benefits of term insurance.

If you are uncertain about your job and its security then you can get a cover against any loss of income. This loss may arise out of loss of employment.

Thus if such a thing happens then your insurer will compensate you for that loss. Cover for the job is an add-on benefit that you can get with term insurance. Thus if you plan to buy one for yourself then you will have to incur cost in term of little extra premium.

These were some of the benefits of term insurance plan in India. You will encounter many more once you will see its practical implication.

Thus it is surely a plan that you must think once in your life. And the early you take action the less you will pay in terms of premium. Stay happy, stay insured.

Benefits of term insurance

Now if you are thinking how and from whom to buy your term insurance then you can find your answers by reading these posts:

  • Best term insurance plan in India: Which will give you insight about how to buy your term plan and what features to look at before buying one for yourself, and
  • Term insurance comparison: Where top 10 companies have been compared on the basis of their claim settlement ratio. This will help you find the best company and the best plan.