A Term plan provides financial security to the family members in the absence of the insured, i.e., the sudden demise of the insured, ensuring long-term security & peace of mind. There are many factors which should be considered while purchasing term insurance, which are mentioned here:
- Riders & Add-ons
These are optional benefits or enhancements that can be added to your base term plan to increase coverage. This benefit can be availed at an added premium to get financial security in case of any unforeseen event. Examples of some of the riders are:
- Accidental Death & Disability Benefit
It provides an added advantage in case of death or disability due to an accident.
- Critical Illness Rider
Get a lump sum amount of death benefit in case any critical illness is diagnosed.
- Income Benefit Rider
This benefit helps to get a regular source of income in case of any disability being diagnosed.
- Term Plan Rider
It provides added coverage for a specific tenure.
- Waiver of Premium Rider
Get your future premium amount waived in case of disability.
- Payout Options
There are different payout modes available, such as:
- Lump Sum
Under this payout method, the complete amount of the sum assured is paid in one single instalment to the beneficiary of the policyholder.
- Income Benefit
Under this payout method, the sum assured is paid in regular instalments to the policyholder’s beneficiary.
- Lump sum + Income Benefit
Under this payout method, the amount of sum assured is paid in a combination of lump sum & income benefit method to the beneficiary of the policyholder.
- Policy Exclusions
- Suicide
- War or Terrorism
- Hazardous Occupations & Hobbies
- Criminal Activities
- Substance Abuse
- Pre-existing Conditions
- Aviation-Related Deaths
- Natural Disasters
- Tax Benefits
- Get a tax deduction on the amount of premium paid, a maximum of up to INR 1,50,000 u/s 80C.
- Get an exemption from tax on the amount of death benefit received.
- Get additional tax benefits u/s 80D in case the term plan includes disability or critical illness riders.
Importance of Choosing the Right Sum Assured
Provided are the important reasons to choose the right amount of sum assured:
- It should be enough to meet the financial lifestyle of the family.
- It should be enough to meet the outstanding debts, loans & any other financial burden of the family.
- It should be objective-specific to meet family goals.
- It should be able to meet the financial needs of your family.
- It should be enough to keep up with inflation.
- It should be enough to provide you with mental peace.
Who Should Buy Term Insurance?
Mentioned are the categories of people who should buy a Term Insurance Plan:
- Young Earners
Youngsters should consider getting term insurance, as it will provide safety & guarantee the family’s financial security when they are not present.
- Newlyweds & Young Parents
Newlyweds & couples entering into parenthood should also opt for Term insurance. Acting as a financial support system, it safeguards the future of the parents & children.
- Sole Breadwinners
Individuals who are sole breadwinners should also consider term insurance, as this will help their near & dear ones in case of their sudden death.
- Homeowners with Loans
Individuals with home loans can also consider term insurance, which will not overburden the family if the insured dies.
- Young Debtors
Individuals with huge debt should also consider term insurance, as it can help prevent the passing of debt responsibilities to their families.
- Entrepreneurs & Business Owners
Entrepreneurs can use term insurance strategically to ensure their business continues & further support their family financially in the event of sudden demise.
- Other Self-Employed Individuals
Term insurance can be protected against loss of income that would occur in case of the sudden demise of a self-employed individual by opting for term insurance.
- Investors
In the event of an investor’s sudden demise, the regular amount invested for wealth generation would be paused. Term insurance would prevent this by securing the future of the family members of the investor.
- Individuals with Dependent Elderly Parents
Term insurance provides financial security for the parents of individuals in case of their sudden demise.
- Retirement Planning
To ease out the retirement transition, one should opt for term insurance. It provides coverage till the time their dependents gain financial independence.
- Senior Citizens
Senior citizens can also look for term insurance to secure their spouses.
- Housewives
In the event of the sudden demise of housewives, term insurance covers the replacement costs of the services.
- Women
Term insurance for women ensures their families & hence provides financial stability.
- Taxpayers
It helps reduce the overall tax liability, & the premiums payable are tax deductible under section 80C of the Income Tax Act.
Factors Affecting the Term Insurance Plan
- Age of the individual
The higher the age, the higher the premium would be because the risk involved for older individuals is also higher.
- Gender
The premium amount in the case of females is usually lower than for males, as women have a higher life expectancy than men.
- Lifestyle habits
Lifestyle-related habits such as drinking alcohol, smoking, & pre-existing medical conditions, if any, can increase the premium amount due to them involving higher risk.
- Tenure of the policy
The premiums calculated with the term insurance calculator for longer tenure are higher than those for shorter ones as the insurer provides coverage for a longer period.
- Policy coverage
Term plans with higher sums are assured to attract higher premiums & vice versa.
- Options riders added
Many riders also influence the cost of premiums & increase your amount of premium.
Conclusion
A term insurance plan helps give financial protection to the family members of the policyholder in case the insured dies. When you buy a term insurance plan, it is feasible to choose an optimal coverage amount that is sufficient to fulfil all your family’s financial needs. So, understand how a term plan works & how much it costs & identifies its suitability. In case the insurance plan fulfils your & your family’s financial needs, buy the insurance coverage to get complete financial security.
