Life insurance is a basic financial necessity these days. However, the penetration of life insurance in India stood dismal at the rate of 2.76%. Although not ideal, with the growing awareness of the benefits of life insurance, the rate is slowly, but surely climbing. As per reports, the new business premiums for life insurance has increased from Rs. 9707.4 crore IN FY 2000-01 to Rs. 19.4 trillion in FY 1017-18.
There are three types of life insurance policies- term plans, whole life plans, and endowment plans. Of these, term insurance is considered to be the purest form of life insurance.
A term insurance, as the name suggests, is for a specified term. While whole life insurance and endowment plans may continue till the death of the policyholder, term insurance is bought for a specific period of time, after which it is either renewed or ceases to exist. Term insurance comes with a host of benefits.
Another distinctive feature of term insurance is its cost. One of the biggest benefits of term life insurance is that it offers a considerably higher sum assured for a lower premium. This ensures that policyholders don’t have to spend a lot on something as basic as a necessary life cover. A working-class individual can actually buy a cover worth a crore for a premium rate of a few thousand rupees. Premiums can be paid monthly or yearly, depending upon your convenience.
A sum assured that factors inflation
The single most attractive feature of a term insurance policy is the high sum assured. While other types of life insurance may provide a sum assured that can sustain one’s current lifestyle, term insurance takes into account rising inflation when calculating the sum assured. For a higher sum assured under any other type of plan, policyholders also need to pay a higher premium. However, with a term plan, policyholders can afford a large sum assured at nominal costs that takes care of their family adequately, despite rising costs. You also have the option of a monthly payout for the family instead of a lump sum payout.
Ideal for youngsters
Because of benefits like lower premiums, flexible payment options, and large sum assured, term insurance is a particularly good option for youngsters who have recently started working and do not want to delay essential investments like life insurance. This becomes even more necessary if you have a family that is dependent on you.
Benefits of term insurance need not end upon the completion of the term. There is always an option of renewing the policy for a few more years, depending on the policy terms. Once you renew a policy, you will continue to enjoy all the benefits of the policy until the end of the extended term.
Term insurance plans also offer riders that can enhance coverage. For instance, opting for an Accidental Death Benefit rider or an Accidental Total and Permanent Disability rider will save policyholders the trouble of purchasing a whole new policy for accidental risks. Term insurance can also come with health-related riders, which provide a lump sum amount to the policyholder at the diagnosis of specific diseases/conditions. These riders can include Critical Illness Riders, Surgical Care Riders and more.
Premiums paid for a term plan can be used for claiming a deduction under Section 80C of the Income Tax Act. The deduction limit for the same is Rs. 1.5 lakhs.
Term plan tax benefits are applicable on the death benefit paid to the family as well. The amount is exempt from tax under Section 10(10D) without any upper limit.
Many insurance providers offer plan variants to policyholders, to enable them to customize their plan as per their needs. Different plan variants offer different benefits. Some of them can include:
Spousal Cover - The option to insure their spouses is provided to policyholders. In this case, both the policyholder and the spouse will be covered throughout the policy for their respective Sum Assured.
Return of Premium - Term insurance can also offer a savings component in the form of the Return of Premium feature. In the event that no claims have been made by the policyholder, the premiums are returned upon maturity.
Varying Payout Options - Policyholders can opt to receive their payout in the form of a lump sum (all at once) or as a monthly income (in the form of monthly installments). Part lump sum-part monthly income options are also available.
Policyholders are thus offered the utmost flexibility with such customizable features. They can tailor their plan as per their current financial needs and future life goals.
Keeping all the lucrative benefits in mind, it would only be a sound decision to take a term insurance policy as early as possible to remain stress-free in the longer run.
Canara HSBC’s iSelect+ Term Plan offers a variety of benefits and is completely customizable. Additional covers like Child Support Cover, Accidental Death Benefit and Accidental Total and Permanent Disability are available to help enhance total coverage. Policyholders can choose from Level, Increasing or Decreasing cover options. Payouts can be tailored too - policyholders can choose from Lumpsum, Monthly Income or Part Lumpsum-Part Monthly Income payout options.