How To Use Term Life Insurance
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Term insurance is a type of life cover, which offers coverage for a pre-defined period or term. If the policyholder expires during this period, the nominee of the policy will receive the death benefit. No benefit will be paid to the policyholder if he/she survives the policy term. However, many term plans come with guaranteed renewal features, which allows the policyholders to extend the policy term.
What Is The Eligibility Criteria For Term Insurnce?
Term insurance plans have minimum eligibility requirements. Most plans are available for people between the age of 18 to 65 years with the maximum maturity age being up to 85 years. The policy term can be from 5 years to 50 years and the sum assured can be from Rs. 20 lakhs to up to Rs. 1 crore and even higher.
Why Do You Need Term Insurance?
Term life insurance is one of the best ways to protect people who are financially dependent on you from an unforeseen event, and at the same time, purchasing a policy is cost-efficient. The policy offers a substantial life cover at a small premium. However, the premium cost is based on the policy you buy.
Here are some reasons why you need term insurance-
- The death benefit that term insurance offers to your family will help them cope with the financial demands in the future. They can finance their monthly expenses as well as pay for big events such as marriage or education.
- People usually purchase expensive properties such as home or cars by borrowing a loan. Failing to pay the loan, might result in the loss of property. If you pass away untimely, then you can secure your family against such heavy loans with a term insurance plan. Your family can pay the loans with the cover of the policy.
Who Should Buy A Term Insurance Policy?
As time passes, the dependencies in our lives might increase too. Some have their spouse and children, and some have their parents to support financially. It is our responsibility to secure their future in the event of your untimely demise.
Here are people who should purchase a term insurance plan-
- If you are a newly-married person, then you should protect your spouse’s future against an unforeseen event. It becomes more important if your spouse is financially dependent on you. A term insurance policy offers lifelong protection to your spouse.
- One of the most important reasons to buy a term insurance policy is to secure your children’s future. If you are a parent, then you should consider buying it. A child can be the most important responsibility in a person’s life. Term insurance will offer your children financial protection if you meet with an unforeseen event such as death.
- Taxpayers should purchase term insurance policy as it offers tax benefits. The premiums of a term insurance plan are tax deductibles under Section 80C. The payouts on maturity are completely exempted from taxes under Section 10(10D). A policyholder can protect their family’s future as well as save money on taxes.
- It is recommended to buy a term insurance policy as early as possible in life. People who have started their career should consider purchasing a policy as the premium cost is cheap for young buyers. The premium cost will not change once a person buys a policy. However, people who don’t buy it early on will have to pay expensive premiums as they get older.
- Retired people should financially secure the lives of their dependents.
How To Choose The Best Term Insurance Plan?
It is vital to compare term insurance plans before you purchase a policy. There are things that you should consider while you compare policies. Here are the factors-
- Solvency ratio suggests if the insurer can settle the policyholder’s claim. IRDAI has made it necessary for the insurers to maintain a solvency ratio of 1.5 as it indicates their financial potential to settle claims.
- Another factor that a policyholder should consider is the claim settlement ratio of the insurer. The ratio conveys how many claims the insurer has approved against the claims made by the policyholders. Look for an insurer with a substantial claim settlement ratio.
Conclusion
The low premiums and larger coverage make term insurance plans a must for everyone, especially if you are the sole breadwinner of the family. Go through the policy details carefully before selecting to make sure that you pick a policy that perfectly meets your requirements.
Also read: Can I Claim Multiple Term Insurance
