What is Term Insurance Plan?
Term Insurance Plan is a type of life cover which provides cover for a certain amount of time. If in case the insured person dies during the term policy time frame then all the death benefits are offered to the nominee. It is even believed and said that term insurance plan is the best form of life insurance. However, it is even one of the most cheapest form of life insurance. In which the insurer pays premium during the coverage period for his/her life insurance coverage. As an additional benefit term insurance plan even provides tax benefits under Sec 80C of Income tax.
Why is Term Insurance Policy Important?
Let me explain you the importance of term insurance plan with an example. Assume that Amit is the only working person in a family of 4 people. It means that 4 people are financially dependent upon Amit. God for bit if something wrong happens with Amit then what will happen with the family. No one can actually compensate for the loss of life i.e., human life that the family has lost. But if Amit had taken term insurance plan then his family will receive financial stability. Even though the loss of human life cannot be compensated but at least family can be made strong financially.
Benefits of Term Insurance Plan
- You can choose lumpsum amount or monthly income as per your requirement.
- Set off all your liabilities and loans.
- Ensure your family so that when you are not there your family can live with pride.
- Claim lumpsum of your amount when have some critical illness.
- It even take cares of you and your family in case of your disability or critical illness.
- Claim additional insured sum in case of accidental death.
- In case of loss of income due to disability or illness you can provide supplementary income to your family.
Features of Term Insurance Policy
Term insurance plan offers tax benefits to its holders. As under Income Tax Act, 1961 Sec 80C and Sec 10 (10D) you can avail lucrative tax benefits that save income tax for you. As the premiums paid for critical illness benefits is even available for deduction under Sec 80D.
2. Policy Term
Minimum term for investing in term insurance is for 5 years. While the maximum term for investing may vary from 25 years to whole life span. One can either opt for single premium policy or for term plan period which ever suits you. If you have opted for single premium insurance policy then the policy term will vary from 5 to 15 years.
3. Plan Choice
The term insurance policy is available in two different options like choosing the plan for single life basis or on joint life basis. Single life plan means that the term plan will cover the life of the insured person only. However, joint life term plan is the plan in which covers the life of both husband and wife via single term plan. Majority of the term insurance plan will offer term plans on single claim basis. This clearly means that the term plan will pay the sum insured amount on the expiry of the insured people.
4. Maturity Age
Best feature of term insurance plan is that it will cover the insured throughout the life. Well most of the term plans offers coverage upto the age of 65 to 70 years. However, higher the maturity age higher will be the premium rate of the term plan. Even the risk associated with the plan will increase with the increase in age.
5. Entry Age
The minimum age limit to entry in a term plan is about 18 years while the maximum age limit is of 65 years. Well the premium of your term insurance plan will increase with the increase in age. In case if you are looking for a long term investment plan than term insurance policy is for you. As they have a lock-in premium which will not change your plan terms.
6. Death Benefits
In the event of death of the assured person the assured amount will be given to nominee. Depending upon the type of the plan, the death benefits will remain same for standard term plan, decreasing term plan or increasing term plan. However payment option in case of term plan will vary. It may include lumpsum payment or monthly, quarterly, yearly payment.
7. Additional Rider Benefits
Additional rider benefits are also available like claim against critical illness/ accidental death/ disability. Even accelerated sum assured facility is also available here. All the benefits can be added in the term plan by simply paying an additional premium amount. Some of the common term insurance riders are:
- Critical Illness Riders
- Accidental Death Benefit Rider
- Waiver of Premium Rider
- Total and Permanent Disability Benefit Rider
- Hospital Cash Rider