How useful is Term Insurance in India

Life Insurance Plans helps us protect our family members financially with a sum assured on our death to ensure they face no hardships after it. That is, the insured individual under the plan can financially secure their family members by paying regular premiums, even in their absence to minimize the difficulties that they might face after. 

But the benefits of Life Insurance only go so far. In case you are looking for ‘Pure Protection Plans’, as Term plans are commonly referred to as, to provide financial aid in your absence then Term plans is the go-to. This is because Term plans specially cover for death. They offer the sum assured as ‘Death Benefit’ only if the insured individual passes away within the policy term. Moreover, they also provide for expensive treatments on diagnosis of an ailment or disability due to an accident if additional riders are availed. The payouts offered are mainly on a lump sum basis but can also be divided monthly if required. 

What are Term Insurance Plans?

Term Plans are the simplest form of Life insurance plans that are availed for a specified term to cover for death. They are much less expensive than other types of Life Plans, i.e. the premiums payable are cheaper as the plans do not have any cash value. However, there are no benefits provided if the policyholder survives the policy term. 

How are Term Insurances useful in India?

To understand better how useful Term Plan can be here are some similarities and dissimilarities between Term and other Life Plans. 

Term Insurance Plans as similar to Life Insurance Plans provide death benefit on the insured individual’s death, as agreed upon. 

The death benefit is given under Term and other Life Insurance Plans are tax-free under Section 10 (10D). There are further tax benefits under Section 80C of the Income Tax Act on the premiums paid available for Term and other Life Insurance policies. 

On the other hand, Term plans are better and more useful in these aspects:

They are more affordable than other Life Plans: 

Term insurance plans have affordable premiums because of their nature; in fact, they have the lowest premium among all Life Plans. This is beneficial because it provides sufficient security and coverage to your family at nominal premiums and is affordable for most unlike other Life Insurance plans like Endowment plans etc. 

Sufficient coverage:

According to the thumb rule, life insurance plan’s sum assured should cover 10 times your annual income accounting for inflation and future costs to be able to cover for all requirements. Availing the coverage possible under term plans given the difference in premium rates is therefore challenging. 

Financial Security:

Term plans though do not provide guaranteed returns and periodic money back or lifelong annuities. However, they offer large sum assured at extremely low costs. This would ensure financial security for your family without burning a hole in your pocket. 

No saving feature: 

Most other Life Insurance Policies have a saving element associated; therefore, they provide death benefit or maturity benefit depending on the insured individual surviving the policy period or not. Term Plans have no saving element and pay only death benefit. Therefore, to cover sufficiently for death, term insurance plans with a good sum assured should be given priority before other life plans.

Benefits of Term Insurance Plan-

1. Premiums payable under Term Insurance plans are flexible and can be either limited pay, single or regular pay. The premiums payable can be monthly, quarterly, half-yearly, or annually. 
2. Depending on the term plan, the death benefit provided is chosen at the time of choosing the plan, the amount might be increasing, decreasing or remain the same. This is irrespective of when the death occurred during the policy term. 
3. Survival benefit is the benefit provided if the policyholder survives the policy term. Though this is provided for most other life plan, regular term plans does not have this benefit. However, insuring company these days have designed term plans to offer survival benefits as premium refunds on maturity. 
4. Add-on benefits enhance a term plan’s basic death benefit. Many now have started opting for add-on features/ plans to their regular term insurance plans. However, additional premiums will be charged to benefit from them. For example Accidental Death, Critical Illness, total and permanent disability benefit etc. 

Conclusion-

Term Insurance plans, also referred to as Pure Protection Plans, are designed to cover death. They come for the lowest premium rates and provide sufficient coverage in accordance. The sum assured is paid in a lump sum if chosen otherwise on the discretion of the company. In the event of the unfortunate demise of the policyholder, within the policy term, term plans secure their family’s financial future substantially; therefore, are useful before other types of life plans. 

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