Life is very uncertain, and the pandemic has only reinforced this fact. You never know when something untoward may happen to you, leaving your dependents devoid of their primary source of income. If you are the sole earning member in your family that may mean that, your beneficiaries do not have any other source of income to rely on in case of your unfortunate passing.
To deal with such contingencies, term insurance is one of the preferred protection products in the market. It offers a host of benefits to your family members in case something unfortunate happens to you. With a comprehensive term insurance plan in place, you can be rest assured that the future of your family is financially secured, even in your absence. That way, they can continue to meet their life goals as planned.
To truly understand how term insurance benefits your family, let us begin at the basics.
What is term insurance?
Term insurance is a kind of pure life insurance. This kind of insurance plan gives you coverage for a particular period. During this period, if the insured person passes away, the term plan guarantees the payment of death benefits to the nominee or the beneficiary of the deceased policyholder. Therefore, the life cover offered by a term insurance plan is valid for a specific period.
Since term insurance is a pure life cover, the premiums charged for these plans are the most affordable among all kinds of life insurance plans. This is because term insurance does not come with an investment component, meaning that the entire premium paid by the policyholder contributes to the life cover only.
The most basic term insurance plans do not offer any maturity benefit if the policyholder is alive after the end of the policy term. However, there are some term insurance plans where the term insurance benefits include the option of return of premium, wherein the premiums paid by the policyholder are returned to them at the end of the policy term, if they survive the policy term.
How can term insurance help secure your family's financial future?
Term insurance can help your family in many ways. Before you purchase a term plan, get to know all the term insurance benefits that your family stands to enjoy from your term plan. Let us see how term insurance can be helpful in securing the financial future of your loved ones.
• It acts as a replacement for income
Term insurance plans are pure life covers. This means that term insurance works primarily and singularly around the concept of securing your family’s future finances adequately. This kind of insurance accounts for the loss of income when one earning member or the only earning member in the family passes away unexpectedly. The term insurance benefits paid out to the beneficiaries helps replace the income they lost because of the untimely demise of the policyholder.
• It helps maintain your family’s lifestyle
For most families with working couples, two incomes help support the rest of the family members too. Even when there is only one earning member, the family, as a unit, eventually is accustomed to a certain kind of lifestyle. The needs and goals are aligned with the level of income being earned. However, when the earning member of a family passes away in an untimely manner, term insurance benefits allow the surviving members to maintain the standard of living they are used to.
• It fulfils your children’s dreams
The future goals of your children are dependent on your income and the income of your spouse (if you are both working). In case one or both the earning members unfortunately pass away unexpectedly, the children would be left with no source of income to support their growth, dreams and aspirations. Here is where term insurance can prove to be useful. The benefits received from the term policy can ensure that your children’s life goals are not derailed even if you are not there to provide for them.
• It helps your family meet significant expenses in time of emergency
You and your family perhaps have some major life goals you aim to accomplish. It could be that you may want to purchase a house of your own a few years down the line. Alternatively, it could mean sending your kids off to the best universities. You may even have some high-interest debts that need to be repaid. In the event of your untimely demise, the loss of income could make it difficult for the surviving members of your family to meet these kinds of significant expenses. However, term insurance makes it possible for them to meet these costs.
In addition to these benefits, term insurance can also help you meet steep medical expenses due to critical illnesses. To enjoy these benefits, you need to opt for add-on riders, which are available at nominal cost. In addition, term insurance benefits include tax benefits under section 80C of the Income Tax Act, which states that premiums paid towards term plans are deductible from your total income up to Rs. 1,50,000. The death benefits obtained are also exempt from tax under section 10(10D) of the Income Tax Act. Tax benefits are subject to provisions of Income Tax Act, 1961, as amended from time to time. In these ways, term insurance benefits your family and you greatly.