Advantages of Term Insurance

What is Term Insurance

Apart from the obvious advantages of safeguarding your family’s future in your absence.

As an insurance policy, term insurance plans have a lot of other advantages as well.

Advantages of term insurance is attractive to young people with children.

Advantages of Term Insurance

Parents may obtain large amounts of coverage for reasonably low costs.

Upon the death of a parent, the significant benefit can replace lost income.

These policies are also well-suit for people who temporarily need specific amounts of Term insurance.

For example, the policyholder may calculate that by the time the policy expires.

Their survivors will no longer need extra financial protection or will have accumulated enough liquid assets to self-insure.

 

Advantages of Term Insurance:

Cost-effectiveness 

Until now I think I’ve done enough to convince you of the importance of getting a term insurance plan.

While that’s true, what’s actually the cherry on top of this cake is that the premiums are extremely low – nominal.

It’s actually the least among all the insurance plans.

And the reason behind that is the non-attachment of any investment element with this.

Typically, a term insurance policy of 1 crore will beg you to pay around 7.5K per annum.

Tax Saving

There’s a generic notion that “term insurance plan is only helpful when I’m gone so what’s the use of it to me”.

While they don’t take into account the benefits their families will stand to gain when they’re gone.

Term insurance plans do have something to help you even when you’re alive.

Getting a term insurance plan means tax benefits on the premium paid, up to a deduction of Rs 1,50,000 annually.

Under Section 80C of the Income Tax Act, 1981.

And even the maturity amount that your family receives is completely tax-free.

Advantages of Term Insurance

Flexibility 

The flexibility of term insurance plans is a major selling proposition for them.

The best term insurance policies are convertible. Which means in case you deem fit.

You can convert your term life insurance policy into an endowment policy.

For the same assured sum but commensurate increase in premium.

Also regarding the medical examination, it’s not mandatory that you’ve to go through them every time, even if your provider calls for it.

You can put in a claim that you recently underwent the examination and as such shouldn’t need it soon.

And if your provider agrees, it can waive off the medical.

A second aspect of term insurance is that it’s much easier to opt out of term life insurance policies than cash value policies (those which have an investment component with them).

You just need to stop paying the premium before your tenure ends and the policy will lapse without providing you any cover.

You won’t get any money back either.

Simplicity

In comparison to other plans, term insurance plans are extremely easy to understand and are very straightforward.

As there are only a handful of decisions you need to make and nothing is concealed here.

Following are the things you need to decide before getting the best term insurance plan for yourself.

  • The premium you can pay and the cover amount you think shall be sufficient for your family
  • The tenure for paying the premium – monthly, quarterly, biannually or annually
  • Until what age you want to be covered. A point to be noted here is that today some of the best term insurance plans also give you coverage till 100 years.
  • But availing that much coverage makes no sense.
  • Ideally you should take the coverage till your retirement, as usually, by that time, you’ll have more earning members in your family.
  • Your kids, and there’s no need for you to pay high premiums for extended coverage.

Advantages of Term Life Insurance

Low Claim Rejection

Among all the various insurance schemes, term insurance has the lowest claim rejection percentage.

The reason being, when buying a term insurance.

It’s require that the buyers disclose every information about their health and lifestyle.

If not you risk being not approve for a term insurance policy.

Which is why both Kotak Life Insurance have over 98% of claim settlement ratio.

Good for young families

Because term life doesn’t build cash value and only covers a specific period.

It’s generally less expensive than whole life insurance and a better value for young families.

Many young families are financially stressed shouldering the costs of caring for small children.

A  mortgage, perhaps an auto loan, saving for college and retirement and other expenses.

Term life insurance can provide peace of mind without gutting your wallet.

Rider benefits

Term insurance plans usually come with rider benefits.

These rider benefits are nothing but add-on services that a buyer can avail along with the their term insurance plan.

An example of this is adding a Waiver of Premium rider to your plan which will allow you to stop paying your premiums.

The benefit, however, is that the policy continues and doesn’t lapse even after you stop paying the premium.

Other popular riders include accident benefit, critical illness and specific disease such as cancer or cardiac cover.

Now it’s very easy to proclaim, “what will happen to me,” but you can never be certain about it.

There’s always this element of “what if” and by getting the best term insurance plan.

You’ll be helping your family during this exact what if situation.

Savings would last less than a year in case of mishaps & only 12% realized the need for a critical illness plan.

Term life insurance can be a good fit. Particularly for young families on a budget looking for coverage for a set amount of time.

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