It is a myth that term life insurance policies are only for people with high incomes or ones who have outstanding financial liabilities or individuals who have financial dependents. The truth is that investing in a term insurance plan is a financially sound decision for everyone since it helps one secure the future of their family in the event of their demise. Therefore, you must consider purchasing a term plan that suits your financial goals and financial capability.
What is a Term Life Insurance Policy?
A term life insurance policy is an agreement between an insurance company and a policyholder that ensures a certain payment to the latter's nominee in the event of their passing within the policy term. Term insurance is often referred to as the purest form of life insurance since it is built on the fundamental principle of financially protecting the insured against a contingent event that is death. Therefore, a term policy acts as a financial shield for your family after your death and helps them manage their finances in a convenient manner.
It is easy to purchase a term plan online. Tata AIA Life Insurance Company offers term insurance policies online; you can visit our official websites and select a policy that suits your requirements. You can also check out the online Tata AIA term plan premium calculator that allows you to ascertain the premium amount of a specific policy by following a few simple steps.
Benefits of Term Insurance
There are several benefits of purchasing a term life insurance plan, including life cover, protection of your family’s financial future, flexibility to add features of one's choice, tax* benefits, and a low amount of premium. The benefits of a term insurance policy have been discussed in detail below.
1.Extensive life cover
A term insurance policy enables you to have extensive life cover. It is usually recommended to choose a life cover that is ten times your annual income. This sum is sufficient to provide financial assistance to your family after your death. Therefore, you should ensure that the life cover you select is adequate.
The premium payments are usually due on a monthly or annual basis, enabling you to plan and set aside sufficient funds to meet the financial obligation. Therefore, investing in a term plan enables you to inculcate financial discipline and a habit of consistent savings. Another benefit of a term insurance policy is that the premium amount is lower for female policyholders, encouraging more females to opt for a term life insurance cover.
Since term insurance is a pure variant of a life insurance policy, it does not contain a savings or investment element. In this context, the life cover in a term policy is only limited to a specific and predefined term. If the insured survives said term, there is no payout from the insurance provider. This feature of term insurance policies is often regarded as a limitation since there is no guarantee of returns on one’s investment except in the case of their death within the policy’s term.
One of the reasons why you should invest in a term plan is the benefits it offers you in terms of tax* relief. In this context, term insurance policies carry substantial tax* benefits for the policyholder. According to Section 80C of the Income Tax Act, 1961, you can enjoy a tax deduction of up to ₹1,50,000 for the premiums paid for a term insurance policy.
In addition to the tax* deduction on the premium paid for a term plan, the nominee of the policyholder is eligible to claim tax* exemption on the lump sum amount received in the event of the demise of the policyholder. This exemption is available under Section 10(10D) of the Income Tax Act, 1961. Therefore, there are significant tax* benefits associated with a term life insurance policy.
4.The flexibility to include add-on features
Unlike most other types of life insurance policies, a basic term insurance policy does not usually contain in-built additional features. Therefore, you can include riders# in your term plan. For instance, you can add the following additional benefits to your term insurance policy.
- Accidental death coverage
- Critical illness coverage
- Return on premium benefit
If you add the ‘Return on premium’ add-on feature to your term insurance plan, you will be eligible to receive an assured sum on the maturity of the policy’s term. By choosing this feature, you can receive the total premium paid by you during the tenure of the policy. However, the ‘Return on premium’ feature entails a higher amount of premium than the one charged on a basic term plan.
5.Financial protection for your family
One of the main reasons why you must invest in a term insurance policy is that it protects your family’s financial strength after your demise. Therefore, you must systematically save and invest a part of your income in a term insurance policy to enable your family to be able to meet various expenses, including the education and marriage of children, the healthcare expenditure of different family members, house rent, loan instalments, and other monthly obligations.
A term life insurance policy is, thus, a safety cushion for your family to prevent them from struggling to meet their financial obligations owing to the loss of the primary breadwinner of the family.
There are many benefits of a term insurance policy, including a life cover, tax* benefits, and financial safety for your family. Therefore, you must invest in a term life insurance policy that is aligned with your financial goals and financial capability.