What is Term Life Insurance what’s is benefits of term insurance

In todays time, financial planning has become very important, and life insurance is an important part of planning. Term insurance is a popular and affordable plan of life insurance, which provides financial security to your family ones in case of sudden accidents. If you need life insurance for your family’s future financial needs, then term insurance may be the best option for you. In this article we will understand everything about term insurance in detail, like its definition, types, benefits, drawbacks, and how you can choose the right term insurance for you.

What is Term insurance ?

Term insurance is a type of life insurance policy, in which you take coverage for a specific period. This policy is valid for a defined term, such as 10, 20, or 30 years. If the policyholder passes away during his term, his nominated family gets the death benefit. If the policyholder does not survive, the policy expires and no payout is received.

The main feature of term insurance is that it provides pure protection, with no investment component. Therefore, it is very affordable and large sum assured you can get it at low premium.

How does term insurance work?

1* Premium Payment :- You have to pay periodic premiums to your policyholder – this can be monthly, quarterly, or annually. The premium amount depends on your age, health, sum assured, and policy term.

2* Covered period :- If any unfortunate incident happens to you during the policy term and you die, then your family gets the death benefit, which is usually assured on your chosen sum. This payout is tax-free (Section 10(10D)).

3* Policy Expiration :- If you survive after the policy term, you do not get any payout, and the policy expires. There is no maturity benefit in this.

4* Policy holder selection :- In this insurance, first of all you have to choose the coverage amount (sum assured) and policy term (duration). You can decide this according to your financial needs.

Types of Term Insurance:-

1* Level Term Insurance:- This is the most common type in insurance in which the sum assured remains constant during the entire term of the policy. I mean, you have a sum assured of ₹50 lakh, so if your death happens during the policy, then the nominee will get ₹50 lakh.

2* Decreasing term insurance:- This policy is for people who want to cover their specific loans, like home loan. This means the sum assured decreases with the balance of the loan.

3* Increasing term insurance:- In this type the sum assured increases every year, which is usually done to match inflation. If you have taken a cover of ₹40 lakh, then it can be reduced to ₹5 lakh every year, this will be relevant with your coverage period.

4* Return on premium term insurance:- This is a hybrid plan in which you get survival benefit after the policy term. If you survive, you get back the premium you would have paid during your entire term. But it is a bit expensive compared to regular term insurance.

5* Group term insurance:- Group term insurance is provided by the employer to its employees, and means a group of people are covered through one policy. This is quite affordable, but when you have a job, the coverage also continues.

6* Convertible term insurance:- This means you can convert the term policy into permanent policy in future, without any medical check-up. This is helpful for people who want flexibility.

Features of term insurance:-

1 Affordable Premiums The biggest feature of term insurance is that it is quite affordable. You can get high coverage at low premiums because there is no investment component in it.

2 Death Benefits If the policyholder dies during the term, the nominee receives the death benefit, which is usually sum assured.

3 No maturity benefits There is no maturity benefit in term insurance. If you survive, the policy expires and you do not get any amount back.

4 High coverage Term insurance offers you very high sum assured at low cost. You can get cover up to ₹1 crore or ₹2 crore, which is difficult to get in other insurance plans.

5 Tax benefits Term insurance premiums qualify you for tax deduction under Section 80A, and the death benefit is also tax-free under Section 10(10D).

6 Rider for enchanced coverage You can add additional riders to your term insurance policy, like:

Accident Benefit Rider: If you die in an accident, you get additional amount.
Critical Illness Rider: If you have a critical illness, you get a lump sum amount.
Waiver of Premium Rider: If you suffer from disability or critical illness, your future premiums are waived.

Benefits of Term Insurance :-

Tax saving Term insurance premiums qualify you for tax deduction under Section 80A, and the death benefit is also tax-free under Section 10(10D)

Cost Effective Term insurance premium has become quite affordable. Its main goal is only to provide financial protection to your family, so you can get high coverage at low cost.

Peace of Mind A term insurance policy gives you and your family peace of mind because in case of your eventual death, your family will get financial support.

Financial security After your death, your family members will get financial security, which will help in fulfilling their daily expenses, loans, education, and other long-term goals.

Drawbacks of Term insurance :-

1. No coverage after policy term When your policy term ends, the coverage also ends. If you need more coverage, you need to get a new policy, which can be expensive depending on your age and health.

2. Premium increase with age If you renew the policy, your premium may increase with age, which can be costly in the long term.

3. Require Regular Premium payments To maintain term insurance, regular premium payments have to be made. If you miss a payment, the policy may lapse.

4. No cash value Term insurance has no cash value. If you survive, the policy expires and no refund or maturity benefit is available.

How does choose term insurance?

1. compare plans How many term insurance plans are available in the market? You need to compare the premiums, benefits, riders and features of different policies so that you can choose the best option for you.
2. Assess your financial needs by understanding your current and future financial obligations, such as loans, children’s education, household expenses, etc. Based on these I am assured that a decision will be taken.
3. Policy Term and Coverage You will also have to choose your policy term carefully. If you want long-term coverage, choose a policy term of 20-30 years.
4. Check the Claim Settlement Ratio It is also important to check the claim settlement ratio of the insurance company. This tells you how efficiently the company settles its claims.

Summary :- In today’s time, when life has become so uncertain, it is most important to secure the future of your loved ones. Term insurance is a financial tool that provides financial security to your family, if you leave your loved ones at any moment of your life. The biggest benefit of term insurance is that it is affordable and provides high coverage.

The concept of term insurance is quite simple — it is a pure risk cover. Meaning, if any unfortunate incident happens to you, your nominated beneficiaries get financial support. This premium structure is quite cost-effective in comparison, especially when we compare it with other life insurance plans. Since there is no investment component in it, you get higher sum assured at lower premiums.