Only 21% of Indians with a life insurance policy have a term plan. 70% of these people are of the view that term plans are only meant for those who serve as the breadwinner of the family. The reality, however, is that term insurance is one of the most basic and simplest forms of life insurance that offers complete financial protection to your dependants if you meet with any unfortunate event in the future.
Moreover, term insurance is cheaper than most forms of life insurance available in the market since it is a pure protection plan. It is designed to provide death benefits to your loved ones to help them meet their financial needs, such as your children’s education, loan repayment and maintenance of their own standard of living.
Let us take a look at what makes a term insurance plan so cheap and affordable:
1.Zero fund management charges: A term plan has no investment component. It is a pure insurance product. A plan in which the money invested is linked to market movements requires regular monitoring and usually levies an additional charge for management of the fund. Term insurance has no portfolio, money management or administrative fees or charges since it is not an instrument of wealth creation. Hence insurers are able to offer competitive premium rates that you can choose from.
2.Limited by term: One might hold the belief that owing to the low premiums, term insurance plans do not offer comprehensive coverage and only offer a low sum assured. However, this could not be further from the truth. A term insurance policy offers a high sum assured, even at low premiums. This is made possible since your term plan comes with a specific term attached, as opposed to a whole life insurance policy, which is taken for life.
3.Buy online: Back in the day, insurance was sold through agents. However, today, you can easily purchase a term insurance plan online. These are 30 to 40% less expensive than their offline counterparts owing to little paperwork, elimination of intermediaries or agents and logistics. All this reduces the service and distribution charges of the insurance company considerably. This benefit is in turn passed on to the customers to help them avail of a policy online at affordable rates with quick processing and hassle-free purchase prices.
4.Compare online: Not only does an insurance company offer you a premium calculator to help you determine the amount payable if you choose a term plan, you can also compare different plan options to arrive at a policy with benefits that suit your requirements. Comparison of different policies offered by market players can also be done online to arrive at one that suits your budget.
5. Age factor: It is advisable to buy term insurance as soon as you start earning and are responsible enough to manage your own finances. This is because your age works to your advantage. Young, healthy individuals can get a policy with a much higher sum assured as compared to someone 10 years older at a much more reasonable rate. The earlier you purchase it, the longer you stay financially protected, and so do your loved ones.
6.Tax benefits: A term insurance plan helps you save tax, thereby further lowering your financial outgo. As per Section 80C, you can avail of a tax deduction of up to Rs. 1.5 lakhs on the premiums you pay towards the policy. Apart from this, the death benefit paid out to your family to help them meet their expenses in the future is also tax-free under Section 10(10D). Although, this should not be the only reason to purchase a policy, however, it is incentive enough.
While aiming for the cheapest insurance should not be the goal, it is worth your while to give a thought to a term policy that you can purchase at a reasonable price and ensure the financial security of those dependent on you. The iSelect Star Term Insurance plan from Canara HSBC Oriental Bank of Commerce offers you comprehensive coverage at affordable premium rates along with riders to enhance coverage. Invest in a cost-efficient pure insurance term policy today to safeguard the future of your loved ones and nurture their dreams.