Life insurance policies that provide death coverage for a specific period are known as term life insurance policies. If the policyholder faces death during the policy term, the insurance amount is paid to the nominee in a lump sum or as monthly instalments.
A term life insurance policy does not include maturity benefits like traditional, money-back, and market-linked life insurance policies. Still, term life insurance policy provides many benefits.
Keep reading to learn about a term insurance plan and its benefits.
What is a Term Insurance Plan?
The term insurance policy is a legally binding agreement between an insured and an insurer that pays out a death benefit to the beneficiary if the insured dies during the policy term.
Features of Term Plans
- The policy-buyer pays the premium.
- Insurance companies promise the insured person a financial safety net throughout the insured’s life.
- In a term insurance policy, the coverage is only valid for a specified period.
- Your investment term can range from 10 to 30 years, depending on your age.
Using a term life insurance calculator, you can compare and buy the most suitable plan online.
Benefits of Term Insurance Plan
You can get the following benefits by purchasing a term life insurance policy:
With term insurance, you can secure a large sum at highly affordable premiums, making it one of the most budget-friendly types of life insurance. You need not pay hefty premiums to get substantial life cover for a term plan.
Whole Life Coverage
Many term insurance policies allow policyholders to extend their term to cover them for their entire lives, i.e., up to 99 or 100 years of age. The policyholder’s dependents are financially secure for the rest of their lives with term life insurance.
The policyholder often has a choice of premium payment terms and modes with term insurance plans. Monthly, quarterly, yearly, or half-yearly payment terms are available for limited, regular, and single premium payments.
Offers Tax Benefits
You can take advantage of several tax benefits by purchasing a term insurance policy. Under the prevailing tax laws, term insurance can be claimed as a tax deduction under sections 80C and 10(10D).
Death Benefit Payout
Many term insurance companies in India allow policyholders to select the payout option that best suits their needs. Term insurance policyholders can choose whether they want their death benefits paid in a lump sum or monthly instalments.
Plan Strengthening Riders
There are riders available for term plans that increase their base benefits. You can add any of these riders to your term insurance plan with a small additional premium.
- Accidental death benefits
- Accidental total permanent disability benefits
- Terminal illness benefits
- Critical illness benefits
- Hospitalisation benefits
- Waiver of premium benefits
Return of Premium Plans
Term insurance offers life insurance protection to the nominee or beneficiary in the event of the life assured’s untimely death. There is no maturity benefit associated with it. But that is not the case with Return of Premium Plans. They allow you to receive maturity benefits under a term policy. You can get a refund of your entire premium amount if you survive the policy term.
The most important benefits of term insurance plans are financial security for the policyholder’s family, the opportunity to beat inflation with the maturity benefit option, and the tax benefits. Insurance providers offer a wide range of term insurance plans with varying benefits.