Four advantages of term plans you should know

Posted by animesh on July 17th, 2017

The importance of a term life insurance is something that’s hard to describe in words. It’s one of the simplest ways to protect your family from the uncertainties of life and is a must have for every individual with dependent family members.

Before we delve into the advantages of a term plans, let’s understand what aterm plan is. To start with it’s an insurance plan with a specified tenure. This tenure is called the ‘term’ of the insurance policy and this is where these kinds of policies get their name from. If the insured person meets with an unfortunate demise within this period, the sum assured is paid to the beneficiaries of the policy holder. The sum assured is an amount chosen by the insured person when he or she buys the plan. With term plans, if the insured person outlives the ‘term’ of the policy then no benefits are payable.

Term plans offer a pure protection instrument covering an insured person against an unfortunate death. Any other risks are not covered under a term plan unless you opt for riders, which will add to the premium amount you pay.

All this might make you think that Term Insurance is a very basic insurance plan. But the thing is term plans add weight to the age old adage, sense in simplicity. Wondering how? Then take a look at these advantages that come as part and parcel of a term plan, it might change your outlook towards them.

1. Cover Amount:

With term plans, there is no limit on the sum assured. So as long as you meet the insurance provider’s norms, you can choose the sum assured you desire. This gives you the liberty to weigh factors like the number of dependents, their lifestyle costs and so on before fixing on a sum assured of your choice.

2. Lowest premiums:

Now you must be thinking such high sum assured amounts must mean really high premium payments. But with term plans, you stand to pay a very low premium. This is because among all the life insurance products in the market today, term plans are the most affordable form of life insurance. Some plans will offer you 1 crore of cover for a premium as low as Rs 10,000 to Rs 12000/ per annum.

3. Simple, easy to understand and transparent:

Term plans are relatively easy to understand. So easy to understand that, you can look around for options, compare them and fix on a plan on your own. After all, all you need to consider whilst taking out a term plan is the sum assured, the length of the term and the company of your choice.  And as long as you don’t default on the premium payments, you are covered against the risk of death within the ‘term’ of the plan.

4. Tax benefits:

The premiums paid toward your term plans are deductible under section 80C of the Income Tax Act, 1961. However, if your premium exceeds 10% of the sum assured then the tax benefit will be limited to 10% (15% in the case of physically challenged individuals). If you are thinking of term insurance and need to know more about the tax benefits involved, then speak to a financial expert first as the factors underlining your tax incentives may vary from what’s described in this article.

Term plans are one of the simplest yet most effective ways to safeguard your family members from any of life’s twists and turns. If you have dependents, then you should give this form of insurance a thought!