How2invest

Life itself is unpredictable. There are several major milestones in life that you have to plan for, including the education of children, retirement, home purchases, and so on. Many people, however, end up neglecting a vital aspect of their portfolio. This is term insurance and how it financially safeguards the family in adverse future scenarios. Let us take a look at how it actually works.

Knowing More About Term Insurance

Term insurance is something that you will find at almost every insurance company. What is it all about? Life coverage is given for a specific tenure (10-40 years or even till age 99), and if you pass away in the interim, your family gets what is known as the sum assured or a lump sum amount. If you survive the tenure, then there is no payout from the insurer. This contributes to it being a plan for pure protection without any savings angle.

Main Attributes

• Insurers usually offer higher coverage at a lower premium (more economical when purchased at a younger age). So, buying early is the way forward to maximise the benefits of term plans.
• Customise tenures based on your financial goals and present circumstances. You can choose a duration till you retire or even once your children finish their education and get jobs.
• Most insurers have optional riders or add-ons which you can integrate into your policy (by paying a slightly higher premium of course). These may include everything from Accidental Death Benefit, Critical Illness Cover, Waiver of Premium, to Income Benefit Riders. 
• Tax deductions are readily available on premiums under Section 80C for term insurance plans. Exemptions are also provided on the payouts to nominees based on the principles of Section 10 (10D). However, to qualify for the full payout exemption under Section 10(10D), the annual premium should not exceed 10% of the sum assured.

How Does It All Work?

It all starts with your selection of the coverage amount and tenure. The insurance company will evaluate your life stage, age, health, occupation, habits, etc, before working out the final premium for the amount you want. Once you begin paying the same, the policy will remain active for this entire period. If you unfortunately pass away during this time, your nominee will receive the lump sum payout from the insured based on the terms and conditions of the policy, following the successful completion of the claim process.

Why It Matters

For starters, you will have to secure your family financially against any untoward mishap in the future. It can replace your lost income and help your family take care of costs without compromises or dependence on others. Suppose you have liabilities such as personal/home loans. In this scenario, your family can use the money to repay them in case of your demise. You will also enjoy higher mental peace if you know that your family will be financially safe in case of any untoward scenarios down the road.

Concluding Thoughts

Term insurance is vital for any financial portfolio and you should not put off purchasing it any longer. It will not come with any investment/savings benefit, but the biggest advantage lies in the high coverage that you can get for a reasonable premium amount. While pure-term plans have no maturity benefits, there are also some variants with ‘return of premium’ options, where premiums are refunded if no claim is made. Look no further and secure your family with a term plan today.