The Unspoken Necessity: Understanding The Vital Role Of Term Insurance

Term insurance is a type of life insurance that offers coverage to the policyholder for the entire policy term in exchange for regular premium payments. It is a pure risk protection plan that provides death benefits to the policyholder's family in the event of their death during the policy term. This financial product is important as it helps the policyholder's family maintain their current lifestyle and financial obligations in their absence. Term insurance plans are affordable, provide long-term coverage, and have low claim rejections, making them a necessary form of financial security for individuals with dependents.

Provides financial security for family in case of death

Term insurance is a type of life insurance that provides financial security to your loved ones in the event of your death. It is a pure risk protection plan that offers a death benefit to the nominee, helping them maintain their current lifestyle. Here are four paragraphs detailing how term insurance provides financial security for your family in case of your death:

Term insurance offers a death benefit to your family or nominee, ensuring they receive a lump sum amount to maintain their standard of living. This benefit helps cover daily expenses, debts, and future costs like a child's education. It acts as an income replacement tool, providing financial support to meet various goals and ensuring your family can continue pursuing their dreams without financial burden.

Term insurance plans are affordable, with low premiums compared to other insurance plans. The premium amount is based on age, health, lifestyle, and coverage amount, making it accessible to individuals with varying financial situations. The premiums are also tax-deductible, providing additional savings for your family.

Term insurance provides flexibility, allowing you to choose the term length, coverage amount, and payout options. You can select a term length that aligns with your retirement age or financial liabilities, ensuring coverage when it's most needed. The death benefit can be paid as a lump sum or regular payouts, depending on what works best for your family.

Term insurance offers additional benefits through riders, such as critical illness coverage, accidental death benefits, and waiver of premium in case of disability. These riders provide comprehensive protection, ensuring your family has the financial support they need during difficult times.

Offers protection against critical illnesses

Term insurance is a type of life insurance that offers coverage to the policyholder for the entire policy term in exchange for regular premium payments. This type of insurance provides a death benefit to the nominee in the event of the policyholder's death, helping the nominee maintain their current lifestyle. Term insurance can also offer protection against critical illnesses.

A critical illness rider can be added to a term insurance plan to provide extra financial assistance in the event of a medical emergency. This rider provides a lump-sum payout to the policyholder to cover associated costs such as doctor consultation fees, medicine costs, ambulance costs, and room rent. The payout can also be used to cover daily living expenses and substitute lost income if the policyholder is unable to work due to their illness.

Critical illness riders cover a range of serious diseases and severe medical conditions, including cancer, heart attack, stroke, kidney failure, and paralysis. The coverage provided by these riders is often more comprehensive than that of standard health insurance plans, which may not fully cover the costs of treating critical illnesses.

Adding a critical illness rider to a term insurance plan can offer several benefits, including:

• Income replacement: The lump-sum payout can substitute the policyholder's monthly salary if they are unable to work due to their illness.
• Affordable premiums: Critical illness riders typically have low premiums, making them an affordable way to enhance the protection provided by a term insurance plan.
• Tax benefits: In some countries, adding a critical illness rider to a term insurance plan may provide additional tax benefits.
• Peace of mind: Knowing that financial assistance is available in the event of a critical illness can provide peace of mind and reduce stress during a difficult time.

When considering a critical illness rider for a term insurance plan, it is important to keep a few things in mind:

• Coverage limits: Critical illness riders typically cover a specific list of illnesses, so it is important to review the coverage carefully to ensure that the illnesses you want covered are included.
• Eligibility: Some critical illness riders may have age restrictions or other eligibility requirements. It is important to review these requirements carefully to ensure that you are eligible for the coverage.
• Exclusions: Critical illness riders typically have exclusions, such as pre-existing conditions or self-inflicted injuries. It is important to understand these exclusions before purchasing the rider.
• Cost: While critical illness riders are generally affordable, the cost can vary depending on the insurance company and the level of coverage provided. It is important to compare the cost and coverage of different riders before making a decision.

Low premium costs

Term insurance is a type of life insurance that provides coverage for a specific number of years, or a term. This type of insurance offers a death benefit to the beneficiary or nominee in the event of the insured's death during the policy term. Term insurance is a cost-effective way to safeguard your family's finances, with low premiums and high coverage. Here are some reasons why term insurance has low premium costs:

• Lesser bifurcations: Term insurance premiums are lower than those for investment-based insurance plans because they have fewer bifurcations. The premium for investment-based plans is used for administrative charges, mortality costs, and investments, whereas term insurance premiums cover only mortality charges and administrative costs.
• No maturity benefits: Term insurance plans do not offer maturity benefits if the policyholder survives the policy term, whereas traditional life insurance plans provide investment returns and maturity benefits, making them more expensive.
• Policy duration: The relationship between policy duration and premium is directly proportional; as the duration increases, so does the premium. Term insurance policies offer coverage for a specific period, and the shorter the term, the lower the premium.
• Healthy lifestyle: Insurance companies may require medical tests and information about lifestyle habits when applying for a term plan. If you follow a healthy lifestyle and have no medical conditions, insurance companies may perceive you as a lower risk and offer a lower premium.

Income tax benefits

Term insurance offers several income tax benefits to the policyholder and their nominees. Here are some of the key income tax benefits of term insurance:

Tax Benefits Under Section 80C

The premiums paid for term insurance are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. The maximum deduction available under this section is INR 1.5 lakhs per annum. This deduction is applicable for premiums paid towards the policyholder's own plan, as well as plans for their spouse and children. It is important to note that the annual premium amount should not exceed 10% of the sum assured. For policies issued before March 31, 2012, the deduction is applicable if the premium is up to 20% of the sum assured.

Tax Benefits Under Section 80D

Term insurance plans often offer additional health cover through riders such as critical illness cover. The premiums paid for these riders are eligible for tax deductions under Section 80D of the Income Tax Act. This section provides deductions for health insurance policies purchased for self, spouse, children, and parents. The maximum deduction under this section is INR 25,000 for individuals below the age of 60, and INR 50,000 for senior citizens. If the policyholder has added health riders to their term plan, they can claim deductions under this section.

Tax-Exempt Death Benefits Under Section 10(10D)

Under Section 10(10D) of the Income Tax Act, the death proceeds received by the nominees or beneficiaries of a term insurance policy are completely tax-exempt. This means that the family of the policyholder can receive the death benefit without incurring any tax liability. This provision ensures that the family can maintain their financial stability without the burden of additional taxes.

Tax Benefits on Riders

In addition to the basic term insurance plan, policyholders can avail of riders or add-ons that provide additional coverage for specific illnesses, disability, or accidental death. The premium paid for these riders may also be eligible for tax deductions under Section 80D, depending on the type of rider chosen. For example, the Critical Illness rider can provide tax deductions under Section 80D.

GST Exemption on Term Insurance

The Goods and Services Tax (GST) is generally charged at a rate of 18% for basic insurance plans. However, the GST charged on the term insurance premium is covered under Section 80C of the IT Act, allowing for tax deductions on the total annual insurance premium amount paid.

Easy to buy

Term insurance is a type of life insurance that provides coverage for a specific number of years, i.e., a term. This type of life insurance offers a death benefit to the beneficiary or nominee in case of the insured’s death during the policy term. Term insurance is easy to buy as it is a simple product that can be purchased online or offline. Here are some reasons why term insurance is easy to buy:

• Term insurance is a simple product that is easy to understand. It is a pure protection plan that pays a predetermined sum if the insured dies during a specific period of time.
• Term insurance can be purchased online from the official website of insurers or from a trustworthy insurance aggregator. Buying term insurance online is a time-saving process as it can be done from anywhere and offers various payment options like net banking, credit card/debit card, and UPI. It is also cost-effective as it does not involve any commission to middlemen or agents.
• Term insurance can also be purchased offline from insurance companies by visiting their branches.
• Term insurance is flexible and allows you to increase the sum assured if you have opted for the life-stage option at the time of buying the plan.
• Term insurance plans offer flexible premium payment options like monthly, quarterly, or yearly payments.
• Term insurance premiums can be paid through various modes such as net banking, debit/credit cards, NEFT, or e-wallets.
• Term insurance is easy to manage as it does not have any complicated investment component.
• Term insurance is easy to compare as multiple term insurance companies offer plenty of term plans, and one can compare various plans online conveniently.

Frequently asked questions