If you have been hearing the words ‘term insurance’ everywhere but are not sure about what is term plan, read on to know about it.
What is a term life insurance policy?
It is a pure form of life insurance policy that pays a considerable death benefit. When you purchase a term plan, it ensures that the insurance provider will take care of your nominees in your absence. It is like any other life insurance policy, except that term policies do not offer any maturity benefit. This means your nominees get the sum assured only if something unfortunate happens to you during the policy period. The nominees can use the money to fund your children’s education and wedding, and sustain the lifestyle of your dependents. It is easy to use a term plan premium calculator to determine the cost of different policies and secure your family’s economic future with this type of life insurance policy.
Why buy a term plan without maturity benefit
Now, you might be wondering why you should opt for a life policy that does not offer any maturity benefit. The most straightforward answer is to make the policy affordable. The term plan only pays a pre-determined death benefit and does not provide anything if you survive the policy tenure. For this reason, it is available at a relatively economical price. You pay a low premium, but your nominees will get a significant lump sum when they need it the most.
However, this is not all; a term insurance policy offers many other advantages.
Highlights of a term life insurance policy
Here are a few plus points of a term plan, which make it a must-have in your investment portfolio.
- Affordability
When you pay the term plan’s premium, the insurer uses the entire amount to fund the policy cover. This helps create a substantial sum assured without you having to pay a high premium.
- Return of premium
Even though the term policy does not pay any maturity benefit, the insurance provider returns you the premium once the policy tenure is over. However, you need to opt for a term plan with the return of premium alternative to avail of this facility. Due to this feature, you do not lose the investment even if you survive the term.
- Flexibility in premium payment
Term plans come with multiple premium payment options to ensure that you can select the one as per your comfort. You can go for the limited premium choice and pay the premium for a fixed period, which is shorter than the policy tenure. Here, the coverage will continue until the policy’s duration. You can also choose from yearly, half-yearly, quarterly, and monthly payment options.
- Death benefit payout options
When it comes to the death benefit of a term insurance policy, you can pick either an installment payment or a lump sum payout alternative. So, you can make a wise choice as per your family’s requirements.
- Feasibility in selecting the term plan’s period
Not everyone has the same expectations from a life insurance policy. Keeping that in mind, the insurer allows you to choose the policy tenure. You can select it depending on whether you need it for a short period or the long term.
- Tax benefits
Section 80C of the Income Tax Act, 1961 permits you a tax deduction of up to INR 1.5 lakh per year on the premium that you pay for the term policy. Also, Section 10 (10D) of the Income Tax Act, 1961 offers tax-free maturity and death benefits.
- Riders
Term policies also offer different riders, such as critical illness and disability covers, among others. By paying a little extra on the existing policy’s premium, you can enhance the plan significantly with these covers.
Now that you understand how useful a term policy can be, use an online term plan premium calculator to compare different plans. Find a cost-effective plan for the well-being of your dear ones without any delay.
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