Nowadays, people have become more aware of making strong financial planning to provide financial security to the family. The rate of insurance penetration is booming rapidly in our country. As more and more people have become aware of the importance of having a protection plan for their family, the insurance companies are coming up with comprehensive insurance products to cater to the various requirement of the buyers.
These days, life insurance policies not only serves the purpose of insurance coverage to the family in case of any eventuality but also works as a great investment alternative to grow the money and create a financial backup for your loved ones. Before we get into detail, why a term insurance plan is a smart investment, let’s first understand what is a term insurance plan.
What is Term Insurance?
A term insurance plan is the simplest form of life insurance product. It is a pure protection plan, which offers insurance coverage to the family of the insured in the form of the death benefit for a specific tenure. The insurance coverage is offered by the policy in return for the premium paid by the policyholder. As term insurance is a pure protection plan, there is no maturity benefit included in the plan. Under a term plan, the death benefit is offered as the sum assured amount of to the beneficiary of the policy, if the insured person dies an unfortunate death.
Term Insurance Plan Vs Traditional Life Insurance
While term insurance is a product of life insurance, the features of term plans vary from other life insurance policies. The most common difference between term plan and life insurance plan is that term plan offers higher coverage at a nominal premium rate, whereas, the premium rate of life insurance products is comparatively higher for smaller coverage. Another major difference between both the products is that life insurance plans offer death as well as maturity benefit whereas, in a term plan, only the death benefit is offered by the insured to the policyholder.
Reasons Why Term Insurance is a Smart Investment
Let’s take a look at different reasons why term insurance is an option of a smart investment.
Offers Low Premium Rate
One of the primary benefits of investing in a term insurance plan is that, as compared to other insurance policies, the coverage offered by term insurance plans are high at a nominal premium amount. For example, you can purchase a plan cover of Rs.1 crore by paying a minimum premium of Rs. 7,400 per month. Thus, a term insurance plan offers an opportunity to ensure financial security to your loved ones without burning a hole in your pocket.
Provides Security Against Eventuality
In the event of unfortunate death of the life assured during the tenure of the policy, the term insurance plan not only provides financial coverage to the family of the insured but also take care of the future financial liabilities of the family. The sum assured amount offered by the term plan helps in the repayment of debt or loan and ensure that the family maintains a good lifestyle even in the absence of the breadwinner of the family.
Another important point that makes the term plan a smart investment option is that it offers flexibility. You can compare the wide range of online term insurance plans and zero in on a plan which best suits your requirements. Moreover, most of the insurance providers offer the option to customize the plans according to your needs.
Unlike other investment options, the term insurance plan also offers the advantage of tax saving. The premium paid towards term insurance policies up to a maximum limit of Rs 1.5 lakh is applicable for tax exemption under Section 80C of Income Tax Act 1961. Thus, along with the death benefit offered by the term insurance plan, you can also save on taxes on the premium paid towards the plan.
Note- The tax applies to the insurance premium as per the tax laws.
Easy to Purchase
Purchasing a term insurance plan is not rocket science. You can easily compare the insurance premium of various term insurance policies using a comparison tool online which is easily available on various websites. This will help you come across the best term plan. You can log on to the insurance provider’s website and purchase the term policy in a matter of a few seconds.
Note- Term insurance policies purchase online to attract a lower insurance premium as compared to term policies purchased through offline mode i.e. company offices or agents.
Once you finalize an insurance plan, you can buy the plan upon paying a specific insurance premium. During the policy term, it will not be revised. You don’t have to worry about any abrupt increase in the policy premium in the future.
Wrapping it up!
With the plethora of benefits offered by term insurance plans, every individual must consider investing in the term insurance plan. So that the core financial needs of the family can be taken care of in the event of uncertainty or death. However, to gain the maximum benefit of the plan at an affordable premium rate, it is always advised to customers to compare various plans online and then zero in on a plan.