Today life insurance is not restricted only to the age-old, traditional endowment insurance covers. In the past decade, the insurance sector’s expansion has brought in several companies, catering to various insurance demands, including a term plan or a money-back policy plan for your family commitments.
So, what is a term plan and how it works? Read the following guide to understand what a term plan insurance is and its benefits.
What is Pure Term Plan Insurance?
A pure term plan insurance is a type of insurance that goes easy on your pocket. This type of term plan promises to offer a lump sum death benefit to your beneficiaries in case of your unfortunate demise during the specified period. In your absence, your family will be taken care of with the assurance of financial stability. However, only if you opt for a premium return policy will you receive the aggregate of the entire premiums paid if you survive the policy term.
As no investment is attached to the term plans, the premiums are paid only towards the mortality charges. It is the sole reason why pure term plan premiums are less expensive than various other life insurance options available in the market.
Benefits of Term Plan
To understand the term plan better and in detail, you should know the term plan benefits:
- Easy to Understand
When you buy a life cover, you may find it difficult to understand the insurance-specific terms about various life insurance policies. One of the benefits of term plans is that they are quite easy to understand.
A pure term plan does not have an investment component in it. You have to pay the premiums, and the insurer will cover your life for a fixed duration to provide the term insurance benefits.
- Substantial Cover at Low Premium
Being one of the simplest forms of life insurance plans, a term plan is extremely beneficial. The prime advantage is that a pure term plan is cost-effective. If you compare it with any other insurance policy type, undoubtedly, a term plan is available at affordable premiums. One golden rule that you should follow is to buy the term plan earlier to avail the benefits at a low premium.
Similarly, it is better to buy a term plan online after comparing the different insurance plans offered by insurers. In this manner, you can purchase the best term plan in India. Moreover, it will be convenient for you to check the benefits offered by the chosen term plan online.
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- Flexibility to Pay Premiums and Payout Options
Another benefit of a term plan is that you can pay the premium monthly, bi-annually, or yearly as per your income. Some single premium policies offer the opportunity to pay the entire premium at one go. It eliminates the hassles of missed payments and policy lapses.
In case of an untoward event leading to your absence, your family can use the lump-sum term plan benefit to meet liabilities like outstanding loans. And in case your beneficiaries need regular financial payouts, you can also arrange for monthly payouts to cover their living costs in your absence.
- Tax Benefits
Another crucial advantage of term plans is that it offers tax benefits within two various sections of the Income Tax Act. In Section 80 C, you can access the tax benefit upon the premium paid towards the term insurance policy. Here, the premium paid to the highest limit of Rs 1.5 lakh is eligible for tax exemption.
You should also note that you can get maximum term plan tax benefits under this section. When you purchase the plan for maximum coverage, it is offered to you based on your health and age. Thus, it is highly important to check the offerings of various plans to choose the best term plan in India.
As for the death benefit of term plans, it is fully exempt according to Section 10 D of the Income Tax Act.
These are a few advantages of investing in a pure term plan. It is recommended that you research online to choose the best term plan in India.
Steps to Purchase the Best Term Plan in India
Step 1: Decide the Amount of Cover Required
To finalize the term plan, you should start by figuring out how much cover you require. The sum assured you choose should be enough to cover the regular household expenses, your child’s education, and your debts, if any.
Step 2: Decide the Tenure of Your Term Policy
Although the term plan tenure might depend on the eligibility, some insurers offer term plans for a fixed duration. It will be beneficial for you to consider a cover that lasts until your retirement. With such a cover, you can secure your family against unanticipated situations.
Step 3: Do Not Ignore Inflation
Always keep in mind the effect of inflation before opting for a term plan. You need to think far ahead and about what your family requirements would be later in life. Once you calculate these factors as part of your financial planning, you can buy the most suitable term plan online.
Multiple benefits make a term plan a popular choice to ensure your family’s financial security. It is your responsibility to shield your loved ones, especially for the times when you may not be around, so that they don’t face any monetary crisis in your absence. Investing in the best term plan in India will defend your family against such hardships and ensure your financial independence.
Sources: https://www.incometaxindia.gov.in/Pages/tools/deduction-under-section-80c.aspx