Some Important Reasons Why You Must Give Top Priority to Term Insurance in Your Portfolio
Covid pandemic has shown how uncertain life can be. Many have lost their family and pals in this horrific period. So, the only thing that can financially keep your family protected from such scenarios is a term insurance policy. Term insurance is a crucial investment option as this financial instrument compensates for financial loss witnessed in the case of the unfortunate death of the family’s breadwinner. While various kinds of life insurance options are available, a term plan policy is the purest kind of life insurance offering the highest coverage at a reasonable premium. Here in this blog discussed why a term insurance policy must be your topmost priority amongst the other financial options.
Term policy is the basic insurance that offers a cover for a specific time period known as a term. In the case of the death of the insured, a term policy offers financial cover to the policy’s nominee. The holder of the policy is required to make payment of the premium for a selected term and failure to pay a single premium timely can lead to policy lapse. The premium of term insurance hugely depends on the age of the policyholder, the age assured and the term of the policy. The holder’s location, profession, health, medical history, and lifestyle habits are factored in while computing the premium.
A term insurance policy provides the assured sum to the policy’s nominee in the form of death benefits on the unfortunate death of the policyholder within the term and as per the circumstances and terms covered in the term policy. As the assured amount is provided to the nominee, the holder of the policy is not the beneficiary of this kind of insurance policy. In the case the policyholder survives through the term of the insurance, then he may get a choice to renew the insurance with a new term, however, the computation of the premium will be conducted factoring in his current age and health status. Now that you know the importance of opting for a term insurance policy, ensure you opt for this option to meet the financial needs of your family in the case of your absence. With the proceeds from term insurance, your dependents can simply meet all the financial crunches with ease. Also, note that nowadays there are certain term plan with return of premium assured if the policyholder crosses the maturity period. However, such policies often require you to pay a higher premium as compared to the purest form of term insurance wherein an assured amount is paid only after your demise during the policy term.
While traditionally, there exist zero survival benefits in the case of the purest form of term insurance, many insurers nowadays have started providing plans with considerable benefits to entice you to opt for a term plan. You can purchase suitable riders and even add on and can consider converting your basis plan into a customised policy plan.
Read on to know why term policy must be given top priority –
Financial safety for your dependents
Term insurance policy offers financial security and stability to your dependents so that you can continue living your life without the need for compromising on your financial goals when you are not around anymore. This assured amount through term policy can assist your family members attain their financial goals like a child’s higher education, payment of home loan EMI, spouse’s retirement fund, etc. The plan also permits you to select the sum assured depending on your expenses and income. This means, you can select the highest amount that you qualify for as per your income and age, which would otherwise take many years for you to save.
Affordable premiums
Premiums of term insurance plans are more affordable than other life insurance policies. This means you can purchase a massive cover to meet your family’s financial requirements at a reasonable premium amount. Such plans come at affordable premiums as there’s zero investment element. As mentioned, there’s no maturity benefit or benefit if you survive on term plans unless you particularly opted for the same.
Suitable riders to select from
While purchasing a term policy loaded with various benefits is comfortable and convenient, it unnecessarily enhances your premium amount for additional features you may not require. The add-ons and riders allow you to customise your term insurance as per your needs. It offers you a comprehensive cover towards aspects you find may be highly risky factoring in the lifestyle. The premium enhances just according to the riders you opt for. A few popular add-ons and riders are waiver on premium, accidental death benefits, accidental disability, critical illness, family income benefits, assured insurability and return of premium.
Customisation according to your needs
Every person has unique requirements, and the term insurance policy is no exception. Your needs for an insurance policy change with distinct life stages. The coverage amount you require when starting your work life differs from the cover you need after marrying and having children. The term policy permits you to decrease or increase your cover according to changes in stages of life. Besides this, you even can consider opting for a monthly income payout plan or return of premium plan on your term policy based on your requirements.
Impact of your increasing age
Purchasing a life policy at an early stage when you are healthy, and young is one of the best means to avail maximum life cover at a lower premium. The premium stays the same across the insurance term. However, as you age with time, you become increasingly susceptible to diseases and other illnesses and ailments, which is the reason why the risk of insurers paying the assured sum even enhances. This ultimately results in enhanced premiums with every passing year. Thus, it is recommended to purchase a term insurance plan as early as possible to enjoy the benefit of the lowest premium and higher sum assured.
Tax benefits
You can get an annual tax benefit of as high as Rs 1.50 lakh every financial year as per Section 80 C for the payment of the term insurance premiums. Apart from this, in the case the premium is not over 10 per cent of the assured amount or the assured amount is at least ten times the premium amount, then Section 10 (10 D) of the IT Act gets applied, which makes the benefit on maturity tax-free.
