TERM INSURANCE- A Brief Overview

The year 2020 has seen some ground shaking changes in the life styles of almost everyone around the globe. With the 2020 pandemic, the need of awareness of insurance policies have spiked up like never before. Keeping that in mind this article includes the basic definitions, conditions and other know how on the term insurance. We will look at term insurances and their advantages and drawbacks with some real time examples, which will help the reader decide whether it suits better to their individual needs.

What is term insurance?

Term insurance is a type of life cover insurance, which offers coverage for a predefined period of time. Basically, it is a type of life insurance. So how does it differ from life insurance? Term insurance provides coverage at a fixed rate of payments for a limited period of time. If the life insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is typically the least expensive way to purchase a substantial death benefit on a coverage amount per premium basis over a specific period of time. No benefit will be paid to the policyholder if he/she survives the policy term. However, many term plans come with maturity benefit, but their premium is on the higher side.

Eligibility Criteria for Term Insurance

Term insurance has minimum eligibility requirements. Most of the plans are available between the ages of 18 to 65 years, the maximum maturity age being up to 85 years. The term of the policy can be from 5 years to 50 years, while the sum assured can even be up to Rs. 1 crore or higher.

Need of term Insurance in today’s world

The answer is quite simple. Term life insurance plans are one of the best ways to ensure protection of people who are financially dependent on you in case of an unforeseen event, and purchasing a policy is cost-efficient.
Also, because of the increase death rates, there is no guarantee that one will be safe and sound all life long, especially in 2020 covid struck year. Therefore it certainly makes sense to have an insurance policy.

• Let’s take an example, if in a home, a single person is the only one bringing food to the table and unfortunately person experiences an unforeseen situation due to any reason. How will the family sustain? Having a term life insurance will certainly insure that in such unfortunate events the assured sum is paid back to the family which in turns will provide financial stability to the family, even if the person is not around anymore.

• People usually purchase properties such as home or cars by borrowing a loan. Naturally, failing to pay the loan, might result in the loss of property. If a person passes away untimely, then the person can secure the family against such heavy loans with a term insurance plan. The person’s family can pay the loans with the help of the assured sum of the policy.

Tax deductions by Term insurance policy

Under Section 80C of the IT Act, premiums paid towards a term insurance plan are eligible for tax deductions of up to Rs. 1.5 lakhs in a financial year. A person can get tax deduction not just for themselves but also for spouse or children.

Keep in mind the following

Term insurance plans have a lot of benefits and provide coverage for various aspects. But at the same time there is a check list which is necessary to be aware of:

• Make sure that the term insurance is not a last-minute tax-saving investment. Calculate the insurance needs carefully and select a coverage amount that feels adequate for the family to manage themselves for a considerable duration in case of your demise.

• Read and understand the terms and conditions carefully before buying a policy plan. It is important to know the limitations of the policy before purchasing it.

• Never buy an aggressively pitched policy plans.

DISCLAIMER

The information contained herein is generic in nature and is meant for informational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product.