A term plan is a type of life insurance that provides you with life cover for a specific term or a period. Thus, a 5-year term plan is a variant of the term insurance plan under which you will be covered for 5 years. It is the minimum duration for which you can buy a term plan. Your nominees will receive a sum-assured if you die within 5 years.
When to Consider Buying a 5-Year Term Plan?
You will need a life cover for a short period only in a few cases. Also, for the most part, you need to ensure that you have adequate long-term cover available.
You may consider the five-year term plan under the following situations:
1. You have taken a short-term loan for urgent needs
2. You are close to retirement but need to keep your dependents financially covered
3. One of your family’s important financial goals falls within the period
4. You are moving out of the country or a remote location for a short period
5. Want to keep your family safe while you decide on a long-term life cover for them
How does a 5-Year Term Plan Work?
Now that you know what is a 5-year term Insurance, let us look at how it works.
1. Before you pay the premium, you have to decide the following things:
a) The duration for which you are buying (In this case 5 years)b) The premium payment mode- Regular payment, Limited payment, Single paymentc) The sum assured you want.
2. After this, your premium is calculated. Now you need to pay the premium till the plan is running. 2 cases arise:
a. If you survive the policy term
If after the 5 years of the policy, you manage to survive. Then no benefits will be payable to you.
But if you have opted for a term plan with a return of premium option, you will be given back all the premiums you have paid.
b. If you die during the policy
If you die in between the 5 years of the policy, then your family will receive the death benefit.
This is the sum assured you selected at the time of purchasing your policy.
You can get a return of premium option with the iSelect Smart360 Term Plan from Canara HSBC Oriental Bank of Commerce life insurance.
Five Benefits of Buying a 5-Year Term Insurance Plan
A 5-year term plan will provide you with the following benefits
1. Life Insurance Cover
It is the main purpose of a term plan. It provides life coverage. A fixed sum assured decided by you at the start of the policy is provided to your family in case you die. This amount can be used to meet the daily needs and to achieve the family’s goals.
Term insurance is the most affordable form of life insurance you can get. You can opt for a high sum assured with affordable premiums. This is because:
a) Unlike other plans such as ULIP, there is no fund to be managed.b) Absence of maturity benefitsc) The simple process of buying
3. Easy to Understand
Term insurance is the simplest form of life insurance present. There is not much understanding required. Also, there is no investment component present. This means you are not required to be constantly involved in the policy.
4. Options to Select Riders
Riders are the additional benefits that can increase the coverage of your existing policy. A term plan includes riders such as
a) Critical Illness riderb) Accidental death riderc) Accidental Total and Permanent Disability
Term insurance is eligible for various tax deductions of the Income Tax Act.
You can claim deductions of up to Rs 1.5 lakh towards the premium that you pay for your term insurance. This is available u/s 80C of the Income Tax Act
Also, the death benefit is subject to be tax-exempt u/s 10(10)D.
iSelect Smart360 Term Plan
If you are looking to buy a term plan, then Canara HSBC Oriental Bank of Commerce Life insurance company’s iSelect Smart360 Term Plan can be considered. This is due to the host of features it offers. These are
1. Flexible Payment Options
In the iSelect Smart360 Term Plan, you are given full flexibility to decide the mode and frequency in which you will pay your premiums.
You can choose to pay your premiums either monthly, quarterly, or even yearly as per your convenience.
Single Payment option; In this option, you can choose to pay a premium for the whole term plan once in a lump sum and enjoy the policy benefits.
2. Increase your Cover Within the Policy
You could’ve brought a term plan when you were single. But when you marry and have a child, you might want to increase your cover,
In this plan, you can increase your sum assured as you move forward with the policy. You can either choose to increase your cover annually or at certain special milestones such as marriage etc, according to the plan.
3. Option to Add your Spouse
If you have taken the policy for yourself and later on want to include your spouse in the plan, you can do that too.
Also in the iSelect Smart360 Term Plan, adding a spouse will get your discount on the premium you pay.
4. Discounts on Premiums
Apart from adding your spouse, discounts are also received if the life assured is a female. Also, the company provides loyalty discounts/ rebates of up to 5% for the existing customers of the company.
5. Tax Benefits
Tax deductions under both sections 80C and 10(10)D are available in the iSelect Smart360 Term Plan
Five-year term insurance is a very specific short-term need. However, term insurance which covers your family until your retirement is an essential investment you should have. So, make sure to have long-term safety while you opt for the short-term as per your need.