ARTICLES

When planning a financial portfolio, a term insurance plan is the first requirement that you should fulfill. Now you might ask why. Well, the answer is quite simple. Life is uncertain and if you are the breadwinner of the family, your untimely demise would result in an emotional as well as a financial shock to your family. While the emotional shock cannot be compensated, the financial one can.

Term insurance is a pure insurance plan. And is the cheapest way to get high coverage. Since affordability and life coverage are the major elements of life insurance, it is important to avail of term insurance first, before opting for any other type of plan. 

Benefits of Term Plan

A term insurance policy ensures that in case of an untimely demise, the family is financially secured. The policy pays a guaranteed death benefit which provides financial security to your family even when you are not around. The importance of a term insurance plan can be summed up in a few points.

Let’s have a look – 

Affordable premiums:

Term plans have low and affordable premiums allowing you to opt for sufficient coverage that would take care of your family’s financial needs as well as their goals.

Financial assistance:

Term insurance plans cover the risk of death and ensure a financial benefit if the insured dies prematurely during the policy tenure. This financial benefit helps the family deal with the financial loss suffered due to the death.

Liability protection:

With the benefit received from a term insurance policy, your family can clear your loans and other liabilities easily. Thus, the plan ensures that the burden of your liabilities does not fall on your family’s head if you are not around to pay them off yourself. 

Comprehensive coverage:

Besides covering the risk of premature death, modern-day term plans also extend coverage for terminal illnesses, accidental deaths, disablements, critical illnesses, etc.  Moreover, many plans allow the option of lifelong coverage giving your family complete financial security. The coverage is also customizable as term plans allow you to add suitable coverage benefits as per your needs. You can, therefore, design a 360-degree comprehensive plan and get covered against all possible contingencies.

Tax saving:

Premiums paid towards such plans are allowed as deductions from your taxable income under Section 80C of the Income Tax Act, 1961 and the death benefit is also tax-free.

There are different types of term insurance plans available in India. The most popular types of plans are:

Level term plan: The coverage and premium remain the same throughout the entire policy tenure. If the life insured dies within the policy tenure, the death benefit would be paid to the nominee and the policy would terminate. However, nothing is payable if the insured survives till the end of the policy tenure. 

Increasing and decreasing term plan: The coverage of the plan increases or decreases according to the plan but the price does not change. If the life insured dies within the policy tenure, the death benefit would be paid to the nominee and the policy would terminate. However, nothing is payable if the insured survives till the end of the policy tenure.

Term plan with return of premium option (TROP): This is the most expensive variant of term plans as there is an element of savings attached. In this plan, the coverage and premium remain the same throughout the entire policy tenure. If the life insured dies within the policy tenure, the death benefit would be paid to the nominee and the policy would terminate. However, if the insured survives till the end of the policy tenure, all the premiums would be returned to the policyholder as a maturity benefit.
 

Your financial portfolio would not be protected against contingencies if you do not invest in term insurance plans. Remember, even your best-laid plans can go awry and so you need financial security for yourself and your family. So, invest in a term insurance plan and make your portfolio immune to possible contingencies which spell financial trouble.