Due to a plethora of insurance options available in the market, a majority of customers tend to overlook the simplest type of insurance. Being the purest form of insurance, term insurance provides coverage to the policyholder as well as offers financial security to his/her family. Additionally, it also ensures that your family is sound and secure, even in your absence. The idea behind term insurance is the protection of the policyholder and his/her family.
Before purchasing term insurance, understanding the basics of term insurance policies is a must. Knowing the benefits and the working of term insurance makes sure that you make informed decisions at the time of purchase. Hence, go through the working of term insurance mentioned below. Take a look:
What is term insurance plan?
Amongst other life insurance policies, a term plan is the most affordable means for the long term security of your family. When you opt for a term policy, the nominees are eligible for a death benefit which help them lead a stable lifestyle even without the presence of the policyholder. Moreover, due to its lack of provision of maturity benefit, term insurance allows low premium payment. For instance, let’s suppose that a policyholder has a term insurance cover of Rs. 1 crore, for a policy term of approximately 10 years. If the policyholder dies within these 10 years, the insurance company will pay out the entire sum of Rs. 1 crore to the beneficiary/ nominee of the policyholder.
In case, he/she survives the policy term, the plan will expire and no benefit will be given out either to the policyholder or his/her dependants.
Once you learn the basics about this policy, you’ll be able to figure the type of term insurance you want to opt for. Let’s take a look at these benefits of investing in a term plan mentioned below:
What are the benefits of term insurance?
1. It offers maturity benefits
One thing that is established by now is that a term plan offers death benefits to the nominees of the policyholder. But have you wondered what happens in case the policyholder survives the policy? In that case, certain term plans offer a survival benefit when an investor continues the policy until its tenure.
2. It allows tax benefits
Since a term plan falls under the list of policies of Section 80C of the Income Tax Act, 1961, it provides its customers with tax benefits. The premium paid towards the policy is exempted from the payment of taxes. Additionally, the death benefit offered by the term insurance is tax-free under Section 10 (10D). The above tax benefits are subject to the provisions stated in the Income Tax Act 1961.
3. It enhances the value of the cover
There are certain companies which might allow their policyholder to enhance their coverage during contingencies. For instance, a policyholder can opt for 50% enhancement at the time of his/her wedding and 25% enhancement at the time of extending his/her family. The enhanced cover allows the investor to start with a modest cover which can be further be increased with huge responsibilities coming his/her way. One needs to check the terms and conditions of the policy before making a decision.
4. It provides riders
To increase the utility of the policy, the insurance companies provide the policyholders with additional features like riders. With the help of these riders, the policyholder can avail more benefits based on his/her needs. Look out for riders like disability cover, waiver of premium, and so on. Term insurance is one of the preferred option for those looking for reasonable plans without compromising on the coverage benefits. Therefore, investment in a term plan is one of the ways to enable your family continue to pursue their life goals even in your absence.