Reasons to buy a term insurance plan are multiple. A term plan is the simplest form of life insurance that provides coverage for a fixed period at affordable premiums. It offers life cover and financial security during the policy term.
Apart from protecting your life goals, you have other reasons to buy a term plan.
Let us discuss about the reasons in detail.
The primary reason to buy a term insurance plan is the financial protection. The death of the earning member of the family can turn the life of the remaining family members upside down. In such a situation, managing household expenses becomes challenging. Term life insurance provides a death benefit to the beneficiaries to cope up with the financial shock if the policyholder passes away.
Going further you can even check the policy document filed by the insurance company to the insurance regulator IRDAI. Never buy any life insurance product from a life insurance company that is not registered as you may witness a probable fraud. Always buy life insurance plans from IRDAI registered life insurance companies.
The premiums of a term plan are low as compared to other types of life insurance policies. However, it is advised to buy a term plan as early in life as possible. As you age, the susceptibility of you having diseases also increases. Hence, the premiums of a term plan are lower when you start at an early age.
The plan doesnt have any maturity benefits. It only offers death benefit. The coverage you can opt for is high. It can start from as low as ₹50 Lakhs to ₹5 Crore term insurance plan.
Also, some term plans have a return of premium option. If opted for return of premium, you will get all the premiums back if you outlive the policy term.
In addition to this, you can add different riders to your term plan to enhance your base plan. For example, add critical illness rider to your existing term plan to get the benefits of the rider if you are diagnosed with a specified illness.
Another reason to buy a term insurance is the flexibility in terms of premium payment. You can choose the premium payment frequency as per your financial horizons. Generally, these plans have a monthly, quarterly, and annual frequencies. However, some term plans also have limited premium payment or single premium payment option as well.
Tax advantages is one of the reasons to buy a term life insurance policy. You can save tax and claim a deduction under Section 80C of the Income Tax Act.
A few highlights regarding the tax benefits available under Section 80C are:
- The deduction limit for the premiums paid for a term plan is ₹1.5 lakhs.
- The death benefit paid to the beneficiaries is also exempted from tax.
- Any bonus from the term plan received by the nominee and the death benefits will also be exempted from the tax.
To buy the best term insurance plan as per your life goals, compare and evaluate different plans from various life insurers. You can buy a term insurance policy online as well. The premiums of online term plans are lower than plans that are bought offline.
FAQs Related to Reasons to Buy a Term Insurance Plan
The earlier you buy, the lower the premiums are. It is because at a younger age, the risk of being diagnosed with any life threatening or critical illness is low. However, the risk increases as we age. Hence, buying a term plan at an early age is a wise financial decision.
When you outlive the term of your policy, your life insurance simply expires. However, term plan with return of premium option gives you all the premiums back on outliving the policy term.
Following the rule of thumb, the term insurance coverage should be 15 to 20 times your annual income. While assessing your need for the coverage, consider inflation to find out the right amount.