How A Term Plan Will Secure Your Family’s Future

2024-08-02

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Life insurance is one of the most important investments that can be made by any individual, providing a financial safety net to a policyholder’s family and beneficiaries in the event of their death.

Traditional life insurance policies provide protection based on periodic- often monthly- payments of a sum referred to as the premium amount. They generally offer investment options and were solicited in the past as a means of providing financial security as well as generating savings through the investment of premium payments. However these types of policies require relatively large premium payments due to their potentially long tenure.

Term insurance plans are becoming increasingly popular for this very reason. Conventional term plans can be described as the most unalloyed form of life insurance, providing protective cover in the event of the policyholder’s death for a fixed period of time. The duration of term plans can vary anywhere between 5 to 40 years, or longer depending upon the age of the policyholder and the insurance provider. They also usually require a medical examination prior to their issue in order for insurance companies to assess the risk they take on with each policyholder, with respect to any pre-existing medical conditions and their overall lifestyle. Term insurance generally requires smaller premium payments while offering similar or greater amounts of coverage when compared with traditional life insurance plans.

Benefits Of Term Insurance Plans :

Financial Security: Term plans secure the future of the policyholder’s family through the payment of death benefits in the event of their passing. They guard dependents such as the policyholder’s spouse, children or elderly parents from having to take on the financial burdens of the deceased in such situations. This benefit is particularly relevant for newly married individuals or new parents as well as businessmen who have considerable debts or other financial responsibilities. The payments may be scheduled either periodically or as a lump sum after filing a claim. These funds can be utilised by the deceased’s family in meeting their daily needs as well as in funding ventures such as a child’s education.
Reasonable Premiums: Term insurance plans are among the most affordable forms of life insurance available today, providing similar coverage amounts as traditional life insurance plans at a fraction of the premium amounts. This is mainly due to the lower tenures of such plans which can only be extended through periodic renewal.
Flexibility: Some term plans may allow for the degree of coverage to decrease over the course of the tenure in situations where the policyholder has taken on debt in some form such as loans. The coverage decreases over time as debts are slowly repaid over this duration. Alternatively term insurance plans may also increase the payout amounts to account for inflation or return the premiums paid on the expiry of the tenure as a maturity benefit. Finally, some plans may also offer investment options that generate income over the tenure and add to the final payout amount on expiry. Paying slightly higher premiums are the most common prerequisite for such adjustments.
Tax Benefits: Premiums paid on term plans are tax deductible up to a limit of Rs. 1.5 lakh per annum under Section 80C of the Income Tax Act of 1961. Additionally, death benefits are also fully tax exempt in some cases under Section 10D although this may vary based on certain factors. It is vital to renew policies before their expiry as the premiums on lapsed policies may not always be eligible for tax deductions.
Coverage Of Additional Risks And Illnesses: Paying a small amount in addition to the monthly premium may allow policyholders to gain coverage for additional risks such as hereditary or critical illnesses or even accidental impairments. They may also allow top ups that increase policy coverage at important junctures in their lives such as marriage, parenthood etc.

Conclusion

Picking a policy that suits your needs in the long term is crucial to get the most out of term plans. Ensuring that you account for liabilities such as existing debt when choosing your coverage amount, as this will allow your family members to avoid such burdens in the event of your passing. It is best to choose a coverage amount equal to or greater than 15-20 times your annual household expenses. It is also vital to account for your age at the time of soliciting the policy with respect to the number of years you will be expected to remain in the workforce. Additionally, purchasing term insurance will be easier when you are younger as you will likely be regarded as a lower risk investment by insurance providers when compared to older policyholders. It may also be cheaper to purchase policies online as brokerage charges are often absent in such cases. Opting for the iSelect Term Plan from Canara HSBC Life Insurance , will give you a variety of options such as whole life cover, premium return and short tenures of up to 5 years to ensure your family’s financial security in any situation.