Life Term Insurance is one of the best ways for the bread winner of family to cover for expenses and liability in case of his or her sudden demise / death. You pay a premium amount every year (can choose monthly or half yearly as well), and get sum assured benefits for your family members on your demise. Your family will be provided the sum assured amount either as lump sum, yearly or monthly payouts as decided by you. There are multiple Benefits of Life Term Insurance including low premiums, huge sum assured compared to other life insurance plans, income tax benefits, taking loans against insurance policy, etc.
Let us understand various Benefits of Life Term Insurance in detail
- Benefits of Life Term Insurance
- Frequently Asked Questions
Benefits of Life Term Insurance
Below are the top 9 Benefits you get in Term Insurance:
1. Affordable Low Premiums
The premiums you have to pay is low compared to other life insurance plans such as ULIP (Unit Linked Market Plan), Traditional plans which are money back plans. Pure Term Insurance is for the sole purpose of providing you life insurance and not be looked upon as investments where you will get you money back.
This is the main reason for low premiums in Term insurance, along with good amount of sum assured paid to your nominees / family.
For example, you can get sum assured of Rs. 1 crore for premium of as low as Rs. 500 per month currently. This premium is based on other factors such as your age, smoking / tobacco habits, other medical history, etc. When you start early the premium will be lowest compared to taking term insurance during later stage of life.
2. Sum Assured Payout
Based on the premiums decided by you and your age, sum assured will be decided by the life insurance company. You need to check whether this sum assured (or the amount to be received by your family after your demise) is enough for your family?
Basically, you should be looking for your average monthly expenses along with other debts in the form of home loan, car loan, etc. and come to the amount that will help your family to cover monthly expenses for the rest of their life or until one of family members start earning. And also to cover the existing liabilities in the form of debt.
So a sum assured decided by you will be paid out to your nominees / family in order to cover for monthly expenses and debt. This sum assured can be paid out as either lump sum amount, monthly payouts, quarterly or yearly payouts as well based on your choice while you are buying the life insurance.
3. Whole Life Cover
Term Insurance are also known to cover for your entire life up to a maximum age of 99 years. One such term insurance is Whole Life Cover that covers you up to the age of 99 years.
You can either choose to pay the premiums up to a specific year, let’s say 80 years of age (for which premiums will be little high) or choose to pay premium throughout the life up to 99 years (for which premium be be less).
Apart from whole life cover, you also get term insurance that will cover you for specific years, such as next 20 years or 40 years, etc. based on your requirements.
4. Income Tax Benefits
You get Income Tax Benefits with Term Insurance Premiums that can help you Save Income Tax. The amount that you pay as Term Insurance premium in a financial year can be claimed under Section 80C with old tax regime, with a maximum limit of Rs. 1.5 Lakh.
New tax regime does not allow this deduction to be claimed.
Also, in case you are getting any returns as maturity benefits, the amount can be claimed under Section 10 (10D).
Watch below vide to know more about Tax Saving options with Old Tax regime:
How to Save Income Tax with Old Tax Regime Video
5. Return of Premiums
Term Insurance are also known to return your premiums paid as maturity benefits. Previously, the premiums pad by you were not returned, but to make the Life Term Insurance product more attractive, companies came up with the return of premiums option so that you don’t feel about only paying the premiums and not getting anything in return in case the policy matures.
The options of return of premium in life term insurance comes with a price of higher premiums to be paid. So in case you want the premiums back, you need to pay high premium amount compared to the premiums to be paid for no returns at all as maturity benefits.
6. Safety for Loans and other Assets
Another benefit of a term insurance plan is that it makes it easier for you to take out a personal loan, car loan or home loan. Term insurance plans act as safety for a loan, which means, in case of an emergency or untimely death, the family can repay the loan using the term insurance death benefit pay-out and get rid of any debt.
Thus, term life insurance policies can help take care of your debt without burdening your family or affecting their lifestyle.
7. Accidental Death Benefits
Accidental death benefits covers you in case of the death of policy holder due to any accident or mishaps. You can add this option separately while buying the life term insurance.
8. Critical Illness Coverage
Critical Illness coverage is another option you can select while buying term insurance, that will pay out lump sum amount in case you are diagnosed with specific critical illness mentioned in the policy document.
9. Terminal Illness Coverage
Terminal illness coverage is yet another option to give you lump sum amount in case you are diagnosed with terminal illness such as AIDS or any other specific illness mentioned in policy document.
So these are the top 9 Benefits of Life Term Insurance that you should know while buying a new term insurance and help your family members in case of your absence.
Out of these benefits, sum assured payout is the important benefit that your family needs in case of your demise, because the sum assured amount will help them to cover their monthly living expenses and to get rid of any existing debt as well.
In case you need assistance or guidance in buying the best Life Insurance for you, please Fill this Form to get more information.
Some more Reading:
- Types of Life Insurance Plans
- Section 80D – Medical Insurance Premiums Tax Benefits
- Types of General Insurance in India
Frequently Asked Questions
Do we get Income Tax Benefits with Term Insurance?
Yes, the premiums paid in life term insurance plans can be claimed as deduction under Section 80C for which the maximum limit is Rs. 1.5 Lakh in a financial year with old tax regime.
Is it good to invest in term life insurance?
Yes it is best to invest in term life insurance. Moreover, it should be treated as pure life insurance plan rather than getting any financial returns out of the plan. Term insurance provides your family maximum sum assured on your demise with minimum premiums to be paid by you compared to any other life insurance plans.
What is the main benefit of life insurance?
The main benefit of life insurance is to get higher sum assured benefits to your family on your demise while you pay low premiums. This helps your family to cover for their monthly living expenses during your absence and also get rid of any debts including home loan, car loan, etc.
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