When it comes to financial planning and securing the future of your loved ones, term insurance emerges as a reliable and cost-effective option. In this article, we will explore the reasons to consider term insurance, its benefits, and different types of term insurance plans.
What is term life insurance?
Term insurance is a type of life insurance that offers coverage for a specified period, known as the “term.” Unlike whole life or universal life insurance, which provides coverage for the entirety of a policyholder’s life, term insurance is designed to offer financial protection for a predetermined duration.
If the insured individual passes away during the term, the policy pays out a death benefit to the beneficiaries named in the policy. If the term expires and the policyholder is still alive, no payout occurs.
Reasons to buy term insurance
• Affordability:
Term insurance is an affordable option. It is an excellent choice for individuals who want to ensure their family’s financial security without incurring steep costs.
• Pure protection:
Term insurance focuses solely on providing a death benefit. It is a straightforward and effective way to ensure your loved ones are taken care of in case of your untimely demise.
• Flexibility:
Term insurance allows policyholders to choose the policy duration. This is in line with specific life events, such as the duration of a mortgage or the years until retirement.
• High coverage amounts:
Term insurance enables you to secure a substantial coverage amount, offering a higher level of financial protection.
• Supplementary coverage:
Term insurance can also be in combination with other investments and savings to create a comprehensive financial plan.
Who should buy a term insurance policy?
• Young professionals:
Young professionals who are just starting their careers and families can benefit from term insurance. This will help ensure that their dependents are financially secure in the event of their unexpected passing.
• Parents:
Individuals with dependent children should consider term insurance to guarantee their children’s education.
• Breadwinners:
If you are the primary breadwinner in your family, term insurance can provide a safety net for your loved ones.
• Debt holders:
Those with significant debts, such as mortgages or loans, can use term insurance. This ensures that these financial obligations are taken care of, in case of an unfortunate death.
• Business owners:
Business owners can utilise term insurance to protect their business partners, cover business debts, and ensure business continuity in case of a partner’s death.
Types of term insurance plans
• Level term insurance:
This is the most common type of term insurance, where the coverage amount remains the same throughout the policy term.
• Decreasing term insurance:
In this type, the coverage amount decreases over time, often used to cover a specific debt like a mortgage.
• Increasing term insurance:
Here, the coverage amount increases over time to account for inflation or other financial needs.
• Convertible term insurance:
This allows you to convert your term policy into a permanent life insurance policy.
• Renewable term insurance:
You can renew the policy at the end of the term without the need for a new medical exam. However, the premiums may increase.
Benefits of a term insurance policy
• Financial security:
Term insurance offers peace of mind, as it provides coverage for your family’s financial needs.
• Low premiums:
Premiums for term insurance policies are generally lower compared to other types of life insurance, making it a budget-friendly option.
• Estate planning:
Term insurance can play a crucial role in estate planning, ensuring a smooth transition of assets to your heirs.
• Tax benefits:
In many cases, the death benefit from a term insurance policy is tax-free, providing an added financial advantage to your beneficiaries.
• Customisable coverage:
Term insurance allows you to choose the coverage amount and term length that aligns with your specific needs.
What are the tax benefits of term insurance?
Here are some of the tax benefits of term insurance:
• Tax deduction on premium
The premiums paid on term insurance policies are tax deductible under Section 80C of the Income Tax Act. You can claim up to Rs. 1.5 lakh per annum as a deduction for the premiums paid.
• Maturity benefit is tax-free
Unlike most other investments, the sum assured received by the beneficiaries of a term insurance policy is tax-free as per Section 10 (10D). The lump sum amount they receive is not subject to income tax.
• Additional tax benefits under Section 80D
You can enjoy additional tax benefits of up to Rs. 25,000 on premiums if you opt for riders like critical illness cover, accidental death cover, and disability cover.
When is the right time to buy term life insurance?
The ideal time to purchase a term insurance policy depends on your individual circumstances and financial goals. Here are some key considerations:
• Age:
Generally, the younger you are when you purchase a term policy, the lower the premiums will be. Starting early can lock in affordable rates.
• Life stage:
Consider purchasing term insurance when you have dependents, outstanding debts, or specific financial obligations.
• Health:
Your health can impact your eligibility for a term insurance policy and the premium rates you pay. Buying when you are healthy can lead to better rates.
• Financial goals:
If you have long-term financial goals, purchasing a term policy can help ensure that you meet your goals.
Eligibility criteria and documents required to buy term insurance plans
Term insurance is a vital instrument for the financial security of your family. Before buying a term insurance plan, it's important to know the eligibility criteria and the documents required.
Eligibility criteria:
- Age: The minimum age to purchase term insurance is 18 years, and the maximum is 65 years. The age limit varies between insurers.
- Income: You should have a regular source of income to be eligible for a term insurance plan.
- Health: The insurer will ask for your medical history and may conduct a medical checkup to assess your health status.
Documents required:
- Age proof: You need to provide a birth certificate, passport, or PAN card as proof of age.
- Identity proof: Aadhaar card, passport, or PAN card can be used as identity proof.
- Income proof: Salary slips, bank statements, or income tax returns can be submitted as income proof.
- Address proof: Electricity bill, telephone bill or rental agreement can be submitted as address proof.
- Medical certificates: Medical certificates may be required if you have pre-existing medical conditions.
Term insurance with Group Sampoorna Jeevan Suraksha
You can opt for the Group Sampoorna Jeevan Suraksha plan available on the Bajaj Finance Insurance Mall. Given below are the key features of the plan:
- The Group Sampoorna Jeevan Suraksha plan is available in two variants. One is available at a subscription fee of Rs. 499, providing a coverage of Rs. 1 lakh. It is also available at Rs. 998 for coverage of Rs. 2 lakh.
- Anyone between the age of 18 and 50 years is eligible to buy this plan.
- The policy provides death cover in case of the insured’s unfortunate demise during the policy term. On the payment of the death benefit, all the risks concerning the member shall terminate.
- The level cover stays the same through the tenure.
- On surrender by a member, the higher of the Guaranteed Surrender Value (GSV) and Special Surrender Value (SSV) is payable.
In the realm of financial planning, term insurance emerges as a versatile and essential tool. Its affordability, straightforward structure, and ability to provide substantial coverage make it an attractive option for individuals at various life stages.
