Term Insurance Plans

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Why Do You Need to Buy Term Insurance Plans?

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Why Do You Need to Buy Term Insurance PlansAditya Mehta, 29, works as an analyst in Noida. His parents and wife stay with him and they are financially dependent on him. The couple is also planning to have a baby and thus, there would be one more person dependent on him. He earns a salary of 15 lakhs per annum which is good enough for them all to lead a normal life. Though Aditya is well settled in life with a good job, he is still worried as he is the only earning member in the family. In the case of his untimely death, he knows his family will come under a lot of financial stress. Aditya knows one of the best ways to safeguard the financial future of his loved ones is by opting for life insurance.

When Aditya decided to buy term a policy, he realized there were lots of insurance companies offering various policies. The key was to choose the one which will suit him the best. Essentially, there are five kinds of insurance: term plans, whole life plans, moneyback plans, endowment plans and unit linked insurance plans. All the products offer tax benefit on the premium paid under Section 80C of the Income Tax Act. In Aditya’s situation, the plan that would suit him the best is a term insurance. Let us look at why?

Understanding Term Insurance

Term Insurance is a pure life insurance policy where premium needs to be paid at regular intervals by the insured and the insurance company pays the nominee the sum assured in case of the death of the policy holder during the term of the policy.

There are no maturity benefits under this plan if the insured lives longer than the policy term. Some plans of insurance companies now offer a part of the amount, in case the insured outlives the policy period.

Reasons to Choose Term Insurance

Financial Security for Loved Ones

A term insurance should never be confused with investment. It is mainly a way to secure the financial future of your family. If you have a term insurance, your family can continue living a comfortable life in case of your untimely death. You must remember, that your needs will change from time to time, and you must revise your insurance cover. In case of Aditya, for the moment he could take an insurance of Rs. 1 crore but he will need to revise when he has a child.

To Deal with Debt

In case of any unfortunate event, outstanding debts like home loan and personal loan can put your family under financial crisis. Term insurance can provide your family a safety shield against all such outstanding debts when you are not around.

Helps to Secure Long-term Goals

Term life plans are for longer term. Availing term plan with adequate life cover helps achieve long term objectives like children education and marriage even when you are not around. Surviving dependents life goals will not hampered in any unfortunate situation.

High Life Cover

Term insurance plan being the pure form of insurance, provides the highest life cover at low-cost. And term insurance is a product with simple structure as it only gives risk coverage. As there is no investment element involved, you can get highest coverage (death benefit) at an affordable rate of premium. Now, there are also term plans which offer survival benefits by paying back the premium on maturity of the policy. You can also opt for extra protection by availing riders like accidental death and disability rider and critical illness rider.

Tax Benefit

Even though, term insurance plans come at lower price, they are also allowed for tax deduction under Section 80C of the IT Act. Not just at the time of investing, huge benefits paid on demise of policy holder is also tax free under Section 10 (10D).

Gives Peace of Mind

Term insurance takes care of your family’s financial needs, your debts in the event of death. It’s important to understand that the term insurance cost is the most essential one as you are paying for your peace of mind.

Conclusion

There are several benefits of a term plan. As a generation, we today lead a stressful life and there are many lifestyle problems we face. By taking a term plan, you can secure the future of your family and thus, this should be one of the first products you should buy.