Sunil Shah, 30, a media manager by profession, has four dependants-his parents, wife and a 3-year old son. Though he has an annual salary of 8 lakh, he is still worried about his family’s financial future. Ask him what is the cause of his worry and he is quick to respond saying, “I am the sole breadwinner of the family, who will take care of them if anything happens to me? I really don’t have enough savings that can help them survive even for 2 years.” And hence, to mitigate the agony, Shah is thinking about buying a life insurance plan.
As we know life insurance plans are classified into different type’s i.e. whole life plans, term plans, endowment plans, money back plans and unit-linked insurance plans (ULIP), the one which Shah zeroed down on was a term life insurance plan. Ask him why and he is quick to talk about the reasons why one should avail this type of plan. And with this, if you too are thinking that why did Shah opt for a term insurance plan, then read on to know about why you should buy this life insurance product now.
First, let’s understand what a term insurance plan is?
A term insurance plan is one of the cheapest and affordable plans that take care of your family’s financial future on the account of your death. A term insurance plan offers financial coverage to the policyholder for a specific time and if the insured dies anytime during the term of the policy then the beneficiary is liable to receive the sum assured.
Under this type of insurance plan, the premium is less whereas the sum assured is high. But if the policyholder outlives the term, then he/she will have to forgo the premium paid.
If you are still wondering whether to avail a term insurance plan or not, then here’s why we think you definitely should.
Reasons why you should buy a term insurance plan
Provides financial security:
To put it simply, a term insurance plan is not an investment plan, but a pure insurance plan that provides financial security to your family. On the occurrence of any unfortunate event, i.e. your death, your family receives a lump sum amount which can help them pay off your loans and make their ends meet. Also, as time passes by, you can revise your cover as per the growing needs of your family. In the case of Shah, if he gets a second child or has altering needs and other liabilities then he can revise his sum assured from 1 crore to 2 crores.
Another striking feature of a term insurance plan is that the premium for this type of plan is much lower as compared to other insurance plans. For a 30-year old individual, a 1 crore term insurance plan for 30 would cost a premium of Rs. 10,000 per year.
One of the best reasons why you should buy a term plan is because they are highly flexible. You can opt for a term insurance plan online or offline and are not required to undergo health check-ups if your coverage amount is 50 lakhs or less. You can also change and customise your plan as per your growing needs and can add new nominees and can change the present ones too.
Low claim rejection:
Compared to other life insurance plans, term life insurance plans have a much lower claim rejection ratio, which clearly states that you will never have your claim rejected unless you haven’t disclosed any serious facts about your health conditions and other habits such as smoking and drinking.
Term insurance plan can be purchased with additional riders such as waiver of premium rider, permanent disability rider, critical illness rider, accidental death benefit rider, women critical illness rider and accidental death benefit rider. However, your premium increases depending on the type of rider purchased.
Like other insurance plans, term insurance plans also offer tax-free death benefit to the beneficiary of the policyholder. As per the Income Tax Act, 1961, a policyholder is eligible to receive tax deductions of up to a maximum of 1.5 lakh under section 80C of the act and beneficiary too can avail exemptions under Section 10(10)D for receiving any amount as part of the sum assured.
Term insurance plans are dirt cheap:
Longer the term, lesser the premium is one of the best features of a term insurance policy. You pay less premium for a longer term. For example: Consider this: If at the age of 30, Ravi purchases a term insurance plan for 30 years for a sum assured of 1 crore, then his premium will be only Rs. 10,000/- per year. But if he purchases the same plan for 10 years then his premium for per year will be Rs. 7,821.
So Ravi’s premium for 30 years will be 10,000*30=3,00,000
Whereas for 10 years the premium will be 7,821*10= 78210
So only at a difference of Rs. 2179, Ravi can insure himself for 20 years more. This also means that by just paying a premium of Rs. 3,00, 00 he can insure himself for 30 years at a sum assured of 1 crore. This clearly signifies that term plans are cheapest and one of the best life insurance policies to avail.
Based on the above reasons, by now you too would believe that a term insurance plan clearly stands out among other life insurance products. However, while opting for this type of plan all you need to do is buy it at the right age, so that on a longer term it helps your family. Never miss out on paying the premium and always disclose all the facts while purchasing this policy as it is based on the principle of utmost good faith as by doing this your beneficiary will get the benefit of a swift claim settlement process.