The uncertain nature of life and the challenging times that we are living in have highlighted the importance of purchasing a term insurance policy. Term insurance is a type of insurance that provides life cover to the policyholder for a specified timeframe. In case of an unfortunate demise of the policyholder during the policy term, the insurance company provides the death benefit to the beneficiary. Therefore, term insurance is ideal for sole breadwinners of the family who wish to protect the future of their loved ones, even in their absence.
Typically, term insurance doesn’t come with maturity benefits and is solely designed to provide financial support to the family in case of the untimely demise of the insured. The lump-sum amount availed as a death benefit can help compensate for the loss of income, service existing loans, take care of children’s education, etc.
Furthermore, to encourage a greater number of individuals to purchase term insurance, many insurance companies offer a term plan with return of premium. This type of term plan allows the policyholders to obtain the premiums paid during the policy term as the maturity benefit. Therefore, apart from providing life coverage, term plan with return of premium can prove to be a great investment option as well. The amount obtained on maturity can be utilized to meet financial goals such as purchasing a car, funding international trips, etc.
Now that you know what is term plan, let’s check out some of the important factors that you must consider before buying it.
Important Things to Consider When Buying a Term Plan
It is advisable to opt for term insurance with a higher coverage amount. You must buy a term plan with a cover amount of at least 10 times your gross income. This will help your loved ones take care of the financial liabilities efficiently even in your absence. Thus, sufficient coverage should be your topmost priority while purchasing a term plan.
When purchasing a term plan, you must opt for a coverage term based on the number of years your family would be dependent on you. Also, the coverage term would depend upon your current age. The term insurance age limit usually varies from one insurer to another. Typically, the minimum age to purchase a term insurance plan is 18 years and the maximum age is 65 years.
When buying a term plan, make sure that you settle for a credible insurer with a high claim settlement ratio. You can check the authenticity and reliability of the insurer online by going through its existing customer reviews.
Mentioned below are some of the major advantages of a term insurance plan.
Benefits of Term Insurance Plans
- High sum assured at an affordable premium
- Critical illness coverage
- Accidental death benefit coverage
- Return of Premium Option
Term insurance tax benefits
- Under Section 80C of the Income Tax Act, 1961, the premiums paid towards a term insurance policy are eligible for tax deductions of up to Rs 1.5 lakh per annum.
- Additionally, the amount obtained on maturity in case of Term Return of Premium Plan (TROP) is exempt from income tax under Section 10 (10D) of the Income Tax Act, 1961.
Once you purchase a term insurance plan, ensure to make timely premium payment. Failing which, your term plan may lapse. To avoid this, you must opt for an affordable premium. Nowadays, before purchasing a term plan, you can easily calculate its premium with the help of a term insurance premium calculator. You should also compare various term insurance plans offered by different insurers before making the final decision. This will help you avail a term insurance policy that best suits your needs.