With the Term Insurance policy: Ensuring a Safe Future

Posted by somesh mane on December 12th, 2018

Life is unpredictable and death is inevitable. No one certainly knows what might happen the next moment. The happy moment can turn out to be the saddest in no time. Same thing was experienced by Mr. Sunil’s family when Sunil, a 32 year software engineer died in fatal road accident. It was an unbearable and irresistible emotional trauma for the family. On a financial front, he was the sole earner of the family. However, his family was not shattered financially as they got the lump sum amount from the insurance company as a death benefit from term insurance he had taken. Crux of the story is – we cannot predict our life, but we can definitely plan to overcome the impact of unpredictability. Term insurance is truly the ideal way to protect against uncertainty of life.

What is term insurance policy?

Term insurance is a pure form of insurance that provides the life coverage for a defined period of time. The term plans are specifically designed to provide financial security to the insured’s family or loved ones in case of death of the insured. It is a very simple plan to understand. Let’s say you purchase a term plan for 30 years with a coverage of INR.1 crore for which you would be paying certain amount of premium every year. The sum assured of INR. 1 crore will be given to your family only in case of death or uncertainty during the tenure of 30 years. If you survive the 30 years term, nothing will be paid out at the end of the term.

Types of term plans

Term insurance policies come in various variants to suit diverse requirement of people. Here are the major type of term plans available today.

• Basic term plans: These are the simple and pure life insurance plans that only offer life cover for a defined period. Sum assured is fixed throughout the policy term and the benefits will be paid to the nominee if the insured dies during the policy term. Only death benefit is offered in this plan
• Return of premium (TROP) plans: This plan is relatively high on cost as it pays out the total premium invested on surviving the tenure as a maturity benefit. Life cover along with return of premium is offered in this plan
• Increasing term plans: These plans give an option to the insured to increase the sum assured on annual basis during the term of the policy. However, premium would remain the same. Because of his feature, premium of such policies are slightly higher than the basic plans.
• Decreasing term plans: As per the changing insurance needs and requirements, sum assured in this policy keeps reducing year on year during the policy tenure.

There are also various riders or add-ons attached to the term plans to enhance the coverage. Riders can be availed at an additional cost of premium. Some of the common riders available in term insurance policies are

• Accidental disability rider: If the policy holder suffers a temporary or permanent disability due to an accident, this rider plays its role by paying certain percentage of sum assured on a regular basis for a specified period of time.
• Critical illness rider: With this rider, the policyholder will receive a lump sum pay-out on diagnosis of any critical illness (stroke, heart attack, paralysis, cancer or kidney failure etc) listed in the policy. Depending on the policy holder’s condition the policy may either get terminated after paying out the reduced sum assured along with critical illness benefit or may continue till the end of policy term.        
• Income benefit rider: This rider aims to provide a regular income to the family of the policyholder once he is gone. Along with the regular sum assured, family of the policyholder gets the additional monthly income for five to ten years by opting for this rider.

Secure your family’s future with term plan

Choosing the right term insurance policy with an adequate coverage for an ideal tenure is an important step to secure your family financially. Even though you save for every important milestones of your life, sometime an unexpected situation can screw everything up. Hence, before you start with the financial planning, securing your family’s financial future with an adequate amount of term insurance coverage is very important. Term insurance can secure your family against many financial consequences, such as

• Income replacement: When you are the sole earner of the family, you would never want your family to compromise on their way of living even when you are not around. As term insurance come with higher amount of coverage, a huge lump sum chosen by you would be paid in any unexpected situation to your family which could help in replacing the lost income. Be it day to day expenses, spending for children’s need, education or be it anything, term insurance can provide a much needed financial support to your family.
• Debts: You would definitely not want to pass on the burden of debt to your family. Dealing with liabilities could put them in financial crisis. However, term insurance pay-outs can be utilised for paying off the outstanding debts.
• Helps to achieve biggest milestones of life: children’s education, marriage etc. are the greater responsibility for any parent. It is also a dream to make everything perfect for your children. Availing a term insurance plan help you here. A lump sum benefit can take care of your children’s higher education costs and marriage expenses without any hassles and compromise to your partner or children.

Apart from the complete protection it offers to your family’s future, term plan helps you save some tax. Premium paid towards the term insurance policy is eligible for tax deduction under Section 80C of the Income Tax Act. Also, the death benefits are tax free in the hands of the nominee as per Section 10 (10D) of the Income Tax Act.

Conclusion

In a nutshell, term insurance is the necessary financial decision every earning member of the family should make to ensure the future financial safety of his/her loved ones. Buy them at your early age for higher coverage at a lesser rate. Ensure to choose the right policy as per your insurance need. Insure yourself today to ensure complete protection for your family!