What is Term Insurance? Benefits of Term Insurance

term insurance

What is Term Insurance?

Term insurance is pure life insurance policy that is effective for a specific period. So, when the policyholder dies in the time of policy period, then sum assured legal hire or nominee is paused.

If the policyholder survives till the time of policy, then no money can be repaid on the term end. So, term insurance is the same as a vehicle insurance.

This is a Purest Life Insurance Policy. You will get a big cover here at low prices.

Now let’s see its benefits.

Term Insurance Benefits

  • This is the cheapest life insurance product. And for this reason, you get a big cover here at a low price.
  • This does not mix insurance and investment due to being a pure life insurance product.
  • When you take life insurance, it is important to know how much you need cover.
  • If you want to take a life insurance cover of 1 crore or through endorsement plans, then you will have to pay a five lakh premium annually. So it can be quite expensive for a lot of people.
  • So many people take as much cover as far as Afford can do. And this is why they remain underinsured.
  • It is quite affordable to get you the right life insurance cover.
  • You can invest in any other investment option for the money you save due to term insurance becoming quite affordable.
  • You can make your Term Insurance comprehensive with Critical Illness, Disability, Premium Waiver Rider etc.
  • There are a number of term insurance plans that give you the benefit of getting less cover in the beginning and with your changing life stages, you can increase your cover.
  • Tax Benefit is available to you on the premiums of term insurance, which are available to the nominee or legal hires. Tax benefit under Section 80C is available and in this financial year, this 10 % is limited to sum assured.
  • If the premium in any of the years in the policy term has not exceeded 10% of the total amount, then the sum assured legal to hire or nominee is fully tax exempted under section 10D.

Example

If you are a man and you are 30 years old and if you do not smoke then when you take the policy online, you get a cover of Rs.1 crore for 35 years at a premium of 7 to 12 thousand rupees per year.

Sum Assured/ Cover = Rs. 1 crore

Premium = Rs.7k – 12k/ Year

Total Year = 35 years

Due to the cut of the commissions of agents, online policies are more affordable compared to offline policies.

Important Note

  1. There is no upper limit on how many amounts of term insurance can be given to you. But for how many amounts of cover you are eligible it depends on your payout.
  2. The less time you take for term insurance, the more profit you get. Because at the young age you are healthy and you can get a good cover at that age at a lower premium.
  3. With age, you can catch lifestyle diseases too. If you take term insurance in such a situation then your premium may be large enough.

 

Also read: EBITDA – Earning Before Interest, Taxes, Depreciation, and Amortization

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