Ch. 13: Benefits of buying Term Insurance

Every time you want to buy something, you sit down with it to check its benefits and see if they align with your particular needs. What are the advantages? How will the product benefit me in the long run? Can I do without it? - These are some questions you ask yourself before your mind gives the green signal.

Term Insurance has become one of the basic financial necessities of life, especially in today’s time. So before investing in term insurance, ask yourself the same questions, and assess the many perks you would receive from the policy. In today’s article, we will take you through them, so you can make a mindful decision!

1. Allows great coverage at low premiums

Term insurance is known for providing the simplest form of life cover at affordable premiums. It promises to pay a large and fixed amount of money to your family in case you pass away while the policy is active. Affordable premiums allow you to choose an adequately large cover amount - based on your family’s lifestyle, income, needs, and requirements.

For example, a Rs. 1 Crore term insurance cover may cost as low as Rs. 900 per month. This means for every rupee you invest, your family will get nearly INR 1000 back, if you unfortunately pass away during the policy tenure.

2. Covers almost all kinds of deaths except suicide

There’s a misconception about Term Insurance - it has a list of types of death it doesn’t cover.

Truth is - there is no such list. Except death due to suicide in the first year of buying the policy, all types of death are covered by term insurance, globally. Further, it is the insurance company’s responsibility to list any exceptions in the policy wordings. And unless anything is explicitly mentioned, you do not have to assume any exception to this rule.

3. It is highly customisable

You can build a customised term insurance policy that fits your needs. You get to design -

• Premium Payment Frequency
  Most term insurance plans allow you to choose between payment modes based on your convenience. You can make premium payments yearly, half-yearly, quarterly, or even monthly. Also, you can change your payment frequency at the time of policy renewal.
• Claim Payout
  It is a really important customization option, because it allows you to configure how your family receives the money. Depending on your nominee's financial aptitude, you should decide if they would receive the claim amount in lump sum, or as a monthly income, or as a lump sum with monthly income.
  
  Pro tip: If your dependent is not financially well-versed, it would make sense to opt for a Lump Sum + Income Option. Here, a part of your claim goes towards paying off loans (if any), and the rest is given as a monthly income for your family’s day-to-day expenses - for a fixed amount of time.
• Premium payment model
  If you want to finish paying off your premiums quickly in, say, 10-15 years, you can choose the Limited Pay option. But if you prefer breaking the premium amount into smaller payments and bearing a lower cost - go for a Regular Pay option.

4. Provides Riders to cover additional risks

Riders are add-ons that will cover additional risks that you are exposed to within the same policy, with minimal hassles and paperwork or medical tests. You can cover various risks - right from loss of income due to critical illness or permanent disability, among others.

5. Offers dual tax advantages

Last and not the least, your term insurance policy also offers tax benefits under two sections of the Income Tax Act, 1961:

• As per Section 80C, you can get tax deductions up to INR 1,50,000 for the term insurance premiums you pay every year.
• Under Section 10(10D), the term insurance claim your family will receive - if you pass away during the policy tenure (Death Benefit) - will also be exempted from tax.

6. 3 year claim payout guarantee

If a term insurance plan has been in force for three years continuously, under the Section 45 of the Indian Insurance Act, 1938, the insurer cannot investigate or reject a death claim on grounds of either -

• Fraud
• Misstatement, or
• Suppression of facts

Hence, your family is guaranteed the claim amount if the term insurance policy completes three years - as long as you pay your premiums on time.

The world we live in today is full of uncertainties, making term insurance more important than ever. It allows you to be with your family, even when you are not. So if its perks align with your requirements, go ahead and invest in a better future.