Term insurance has gained huge popularity over the years simply because apart from being the most unambiguous insurance product, it also provides the most bang for one’s bucks. No need to say that people looking for financial security for themselves as well as their family members usually opt for term insurance.
Financial experts say that there is no ambiguity as there is no return on the amount paid as premium and this policy simply offers to pay the nominee of the policyholder the amount insured for in case of the death of the policyholder during the tenure of the policy.
Here are 5 reasons why everyone should buy a term insurance plan:
1. Easiest-to-understand plan
Term plans are easier to comprehend and simpler in usage, unlike, say, an endowment plan or a Ulip. You just need to pay the premium and your life will get covered for a certain amount.
“Term insurance is the easiest-to-understand life insurance product. It simply covers the life of the insured by the amount equal to the cover mentioned in the policy. Number of years the risk cover will remain valid as well as the premium payable and other terms and conditions are easily accessible from the policy,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.
2. Cheapest plan
Apart from being easiest-to-understand, term insurance is also the cheapest form of life insurance. It is cheaper than other insurance plans as it does not mix insurance and investments. It is, therefore, the best way for the bread earner to protect his family in case of his death.
3. Provides larger cover
Term insurance plans also provide larger life cover than other types of insurance for the same premium. Because of this advantage, it is possible for everyone to get adequate life cover not only for oneself but also for one’s near and dear ones. And the best thing is that the premium is also quite affordable.
4. Early-Mover Advantage
Term insurance plans provide early-mover advantage. In fact, you can usually buy a term insurance plan starting from 18 years till 65 years. However, as the premium for term insurance steeply increases with advancing age, it is better to buy a suitable plan as early as you can so that the premium remains most affordable.
“The premium paid during the tenure of the policy remains fixed. Also, the younger you are the cheaper is the premium for any policy. Hence, it is advisable for the earning members of any family to take insurance as early as possible,” says Kapur.
5. Tax Advantage
Tax benefits on the premiums paid can be availed u/s 80C of the Income Tax Act, 1961, along with further deductions up to an amount of Rs 1.5 lakh. The insured can also avail of exemptions u/s 10(10)D for receiving any amount as part of maturity benefits from his/her insurance policy.