Why should I choose a Term Insurance Plan?
The term insurance benefits plan provides numerous advantages. The benefits of term insurance plan are to provide financial stability to your family members in different unexpected events. The benefits of term insurance plan also extend to the provision of several ways to ensure financial growth. The term insurance plans are simple, and accessible also as an online term plan. One should consider all these points while looking for the benefits of term insurance plan.
There are various reasons which can be catered for by a term insurance plan. Let's explore the reasons for choosing a term insurance plan :
Term insurance Plans are popular because of their simple nature and great return. There is definitely less jargon to deal with as there are no complex clauses explaining risks or dividends ! Since term insurance policies are Pure Protection policies, their main purpose is to take care of a family's financial needs in case of an untimely demise.
Other life insurance policies or endowment plans are Cash-Value policies which require careful analysis of how a portion of the premium is to be divided for a risk cover and the rest is invested to generate an earning. This can be overwhelming for many laymen who do not understand the workings of the market.
The Term Insurance Plan on the other hand is quick and simple to understand . A term insurance plan benefits the family in case of the policyholder's untimely death. There is a single death benefit paid out to the nominee selected at the time of purchasing policy. There is no other savings component or maturity benefit.
Renewing a term policy is a simple affair where the premium is usually recalculated and adjusted at the end of term. The term policy is convertible into an endowment policy at renewal too. Opting out or cancelling of a term policy is also an easy affair as the policy cover ceases if you stop paying the premium. There is no return as there is no saving component and the policy is simply cancelled.
Low and Fixed Premium :
Term insurance policies are a steady and reliable option for those on a budget. The low premiums can ensure financial protection in an emergency which doesn't burn a hole in your pocket. Term insurance premiums are low because the term insurance cover is offered for a restricted period of time. Most of the time, people outlive their policies which translates into no payout from the insurer and sometimes, a return of the premium charged (in case of TROP plans) to the policyholder. It's a win-win!
The premium decided at the time of purchase of policy remains unchanged throughout the term of the policy, i.e, the premium is fixed for a term insurance policy. This is a major advantage of term insurance premiums as you are safe from annual premium hikes and your loved ones are protected by a safe and cost-effective insurance policy.
For Example :
Mr Sushil, a 30 year old working professional can get a level term insurance policy for 20 years with a sum assured of ₹10Lakh at a premium rate of ₹3000 paid annually.
If Mr Sushil purchases an endowment policy with the same sum assured without profits but with the same death benefit as in term insurance, his annual premium will be over ₹30,000.
If Mr Sushil purchases an endowment policy with profits for the same death benefit, his annual premium will be over ₹50,000 per year.
Thus, term insurance plans offer a steady, standard financial protection for a fixed term at a low price.
Rider Benefits :
Term Insurance plans offer additional options or rider benefits in case of contingencies like an accident or a critical illness. There are majorly 6 types of riders offered with term insurance plans.
Accidental Death Benefit Rider :
This is a benefit offered wherein if the person passes away due to an accident, an additional sum is paid to beneficiary, which is over and above the assured sum received as death benefit. In case of normal death, only the assured sum is paid out to the beneficiary.
Accidental Disability Rider :
This rider comes into effect only in case the person is disabled due to an accident. A certain percentage of assured sum is paid as regular income by the insurer to the beneficiary for a specified amount of time. The disability must have occurred in an accident for this rider to become effective.
Accelerated Death Benefit :
If unfortunately, the policyholder suffers from a terminal illness wherein money is needed to take care of medical expenses, a lump-sum amount is paid out in advance for medical care.
Critical Illness Benefit :
If a person is critically ill, it can affect their income and the family's overall finances. This rider assures a lump-sum payout in advance when a critical illness , as listed in the policy is first diagnosed.
Waiver of Premium Benefit :
This rider ensures that your term policy remains active even if you are unable to pay future premiums due to loss of income or disability.All future premiums are waived off if this rider is in place.
Income Benefit :
This is an additional benefit wherein the family receives an extra income over and above the assured sum for a specified number of years. It ensures a regular source of income for some time, in case of untimely death.
Online Facilities :
You can buy term insurance policy either Offline or Online. The benefits of term insurance plans available online are plenty. You can make a more informed decision by first comparing the various term insurance plans offered by the companies (level term, group term , TROP term, standard term etc.). Then choose an increasing, decreasing or convertible plan type to supplement your life insurance goals. And finally , you can compare the various premium rates offered by all major insurance providers. While purchasing a term insurance policy online, you can even avail discounts and bonuses, which are not available in an offline transaction.
Online purchase of a term insurance policy removes the middleman or 'agent' fee along with offering a higher sum assured than offline branches. Also, in many cases, medical tests are not required to purchase an online policy for a sum assured under ₹50 Lakhs. Online policy purchases are more transparent, convenient and reliable.
Good investment for individuals starting a business :
Although term insurance plans are not usually considered for investment growths, there are certain benefits like tax exemptions under sec 80C and 10(10D) of the Income Tax Act, which make term insurance plans a steady investment.
For individuals who are young and venturing into business or a Startup, buying term insurance policy is a better investment than buying a cash-value policy with high premiums. This can help save insurance cost spent on cash value policies and you can use the capital for business development.