The term insurance plans receive a lot of praise from a lot of people. It is a popular form of life insurance because term insurance offers a high life cover at a very low cost thereby enabling most people to get such a plan. However, term plans get their share of bad press too, with many people even saying that a term insurance plan is not worth buying. This is actually a major myth, as a term plan is definitely worth buying. Take a look at this article to know why it is so and how you can choose the most suitable cover for yourself.
Reasons Why Term Insurance is Worth Buying
Here are some reasons that help to establish the fact that term insurance is a very important requirement:
1. Inexpensive - The biggest reason why you should get term insurance is that it is inexpensive. You can get a good term life insurance plan without having to pay a very high premium. This is handy, as not everyone can afford the more expensive forms of term insurance such as ULIPs or endowment plans. High coverage at low premium is the best reason to opt for a term insurance plan.
2. Substantial Life Cover- Term plans are especially popular because they offer very high sums as life covers. You can get covers worth crores of rupees for long periods of time that can even go up to 30 years. This gives you the assurance that no matter what happens to you, your loved ones will not face any financial problems after your demise. The highest life insurance coverage is possible with a term insurance plan.
3. Easy to Buy - These days the life insurance companies have a very strong digital presence. As a result, buying term insurance has become a lot simpler. You do not have to physically go down to the insurer’s office, stand in a quest or worry about submitting file loads of documents. You can simply go online and get your plan instantly by just clicking a few buttons. Opting for an online term insurance policy would not be convenient, but also provide you a discount on premium as there would be no intermediaries involved and hence no brokerage payout. Thus, online term insurance plans through the digital platform is the easiest way to opt .
4. Very Simple to Understand - A term insurance plan is a very simple and straightforward form of life insurance. You pay a premium in return for which the insurer promises to pay the sum assured to your nominees if you die within the policy period. If you outlive the tenure, you don’t get anything in return and the policy ends. This is how simple the terms and clauses of the policy are and that makes it simple for everyone to understand term insurance. In fact term insurance plans are the simplest form of life insurance with no element of savings and hence have the least complications.
5. Multiple Payout Options - You can choose from among multiple payout options when it comes to buying the plan. If you want your family to receive the sum assured after your death in a lump sum amount, opt for the lump sum payout option. If you want to break it up and make the sum assured work as your monthly income, you can opt for the staggering option. This is another benefit you get when you buy a term life insurance policy. Most term plans, especially the online term insurance plans have multiple payout options for you to choose from. For example, in HDFC Life Click 2 Protect 3D Plus Plan, there are multiple payout options for the policyholder to choose from like:
- Life Option - In this Option, the sum assured would be paid out to the nominee as a death benefit in a lump sum if the life insured dies or is diagnosed with a terminal ailment within the policy tenure. However, if the life insured suffers a permanent accidental disability during the policy tenure, then the future premiums are waived and the policy continues.
- 3D Life Option - In this option, the sum assured would be paid out to the nominee as a death benefit in a lump sum if the life insured dies or is diagnosed with a terminal ailment within the policy tenure. However, if the life insured suffers a critical illness during the policy tenure, the future premiums are waived and the policy continues.
- Extra Life Option - In this Option, the sum assured would be paid out to the nominee as a death benefit in a lump sum if the life insured dies or is diagnosed with a terminal ailment within the policy tenure. If the death is accidental, there is an additional death benefit that is payable. However, if the life insured suffers a permanent accidental disability during the policy tenure, then the future premiums are waived and the policy continues.
- Income Option - In this Option, the sum assured would be paid out to the nominee as a death benefit in a lump sum if the life insured dies or is diagnosed with a terminal ailment within the policy tenure. Also, there would be a payment of Monthly Income for the Income Period paid to the nominee before the policy terminates. However, if the life insured suffers a permanent accidental disability during the policy tenure, then the future premiums are waived and the policy continues.
- Extra Life Income Option - In this Option, the sum assured would be paid out to the nominee as a death benefit in a lump sum if the life insured dies or is diagnosed with a terminal ailment within the policy tenure. Also, there would be a payment of Monthly Income for the Income Period paid to the nominee before the policy terminates. Also, if the death is accidental then a proportionate amount of being paid as a lump sum as well as Monthly Income. However, if the life insured suffers a permanent accidental disability during the policy tenure, then the future premiums are waived and the policy continues.
- Income Replacement Option - In this Option, 12 times the increased monthly income would be paid out to the nominee as a death benefit in a lump sum if the life insured dies or is diagnosed with a terminal ailment within the policy tenure. Along with the level or the increasing monthly income would be paid to the nominee for the remaining tenure. However, if the life insured suffers a permanent accidental disability during the policy tenure, then the future premiums are waived and the policy continues.
- Return of Premium Option - In this Option, the sum assured would be paid out to the nominee as a death benefit in a lump sum if the life insured dies or is diagnosed with a terminal ailment within the policy tenure. Along with that, if a person insured outlives the policy term, the total premium paid would be returned back. However, if the life insured suffers a permanent accidental disability during the policy tenure, then the future premiums are waived and the policy continues.
- Life Long Protection Option - In this Option, the sum assured would be paid out to the nominee as a death benefit in a lump sum if the life insured dies or is diagnosed with a terminal ailment within the policy tenure. The cover continues for the life of the insured. However, if the life insured suffers a permanent accidental disability during the policy tenure, then the future premiums are waived and the policy continues.
- 3D Life Long Protection Option - In this Option, the sum assured would be paid out to the nominee as a death benefit in a lump sum if the life insured dies or is diagnosed with a terminal ailment within the policy tenure. However, if the life insured suffers a permanent accidental disability or is diagnosed with a critical illness during the policy tenure, then the future premiums are waived and the policy continues. You need to choose the options according to your requirements.
6. Tax Benefits - You get a tax relief of up to INR 1.5 lakhs per annum when you pay a term insurance premium. This provision is available under Section 80 C of the Indian Income Tax Act. This is a simple and very effective way in which you can save tax when you buy a term life insurance plan. However, if you opt for a health-related rider along with your term plan, tax benefits of up to INR 25,000 can also be availed under Section 80D of the Income Tax Act. The death benefit in a term plan is also tax-free under section 10(10D).
7. Simple Claim Process - The claim process as well as documentation is very simple in term insurance. After your demise, your family can easily raise a claim and get the death benefit in a short span of time. The process can also be initiated online, which makes it all the more convenient.
These are the reasons that help demystify the myth that term insurance is worth buying.
When to Reconsider Getting Term Insurance?
Even though term insurance has many reasons working in its favour, there may be a few occasions when you do not require a term plan. They are:
- At an Older Age: A term insurance plan is mainly taken to protect the financial well being of your dependents or family members, in case something happens to you. This is why a term plan is ideally bought at a younger age. The premium would also be lesser if you are also young when the policyholder has small children or aged parents to support. However, if you are older, you might not have too many people financially dependent on you. However, if you do have anyone who is financially dependent on you, you can always opt for a term insurance plan even if it costs a little more.
- After Clearing All Your Debts: Another reason why term insurance is commonly purchased is to cover the debt. For example, Mr Raj takes a home loan of INR 25 lakhs for a period of 10 years. To cover the loan, he takes a term plan of INR 25 lakhs too. Sadly, two years after taking the loan, Mr Raj dies. His family then uses the death benefit received from the term plan to clear the loan. This proved to be helpful for the family. So, weigh your debts and liabilities before opting for your term insurance plan.
- Plan Variants That are not Suitable: There are some variants of term insurance such as the TROP or the term insurance with return of premium plan which is way more expensive than the other variants. A TROP pays back the premium you paid over the years if you outlive the policy period. A TROP is generally more expensive than a regular term plan. Hence, many experts believe that if you wish to have a return component, get an endowment plan which offers a much larger set of benefits. When buying a term cover, focus only on the life cover and nothing else.
The Bottom Line
As you can clearly see from the points mentioned above, term insurance has far too many advantages and that makes the term life insurance policies one of the very best forms of life insurance to choose from. If you want to invest in term insurance, look for multiple plans, compare them and then pick the one which is of greatest use to you. With the help of a good term insurance cover, you will be able to get all the benefits mentioned above and your loved ones will also remain financially protected if something were to happen to you.
