Term Insurance – a must buy product

Term insurance is a pure life insurance product, which provides financial protection in case of death of the life insured during the term of the policy. A term insurance plan is the most affordable form of life insurance cover. It is designed to financially protect ones family in case of death of the bread earner.

The purpose of having life insurance is to provide life cover to an individual and financial security to its family in case of uncertainty.

There are two ways the individual can take life insurance:

1. By selecting a pure life cover, known as term insurance

2. By taking life cover with a savings component, called endowment insurance

Advantage of term insurance:

Actually having an insurance is an advantage but talking about term insurance, it provide pure life cover. Meaning there is no savings / returns component. They are basic life plans which make life insurance more affordable with other options. It allows a policyholder to opt for a larger life cover at a lower premium when compared to a similar endowment plan.

Why do you need Term Insurance?

Nowadays, term insurance is going a must for an individual. Here are some reasons.

· Family factor: In your absence, the term insurance money can be used to meet your family’s monthly expenses and important goals like your child’s education.

· Assets: You might have loans for assets like a house or a car. If something goes wrong to you, your loved ones might be burdened with loan repayments. In such a situation, the term insurance pay-out which your family will receive can be utilized in paying off outstanding loans.

· Lifestyle: Modern day lifestyle problems may cause severe diseases. Some term insurance plans don’t just protect your family after death but also offer critical illness protection during policy term. This feature pays out on the diagnosis of certain critical illnesses like cancer or heart attack.

Who should buy a Term Insurance Policy?

Anyone with financial dependents should buy a term insurance policy. This includes young professionals with dependent parents, young married couples, businessmen and self-employed, SIP investors, and in some cases, even retired persons.

Benefits of Term Life Insurance:

Life Insurance premiums paid are deductible from taxable income under Section 80C, so they provide a double benefit for taxpayers i.e. protection and tax-saving. The maturity amount from an insurance policy is also exempt subject to conditions under Section 10(10D) of the Income Tax Act, 1961.

The most important is that Term insurance has the lowest premiums among the other types of insurance policies available as it provide a pure life cover.

It is advisable that individuals should consider the three major benefits associated with term insurance policy. The three major benefits are – life protection, tax saving and affordable premiums.

· High Life Insurance cover at affordable premiums: Term insurance plans provide large amount life insurance cover at an affordable premium.

· Cover against Critical Illnesses^: In addition to a life cover, term plan also provides protection against critical illnesses with a small additional premium. Critical Illness Cover provides a lump sum amount at the time of diagnosis of illness like a heart attack, cancer, kidney failure etc.

· Permanent Disability: If this feature is opted with a term insurance, then the insurance company pays all your future premiums in case of total and permanent disability. This releases the tension as your life insurance cover continues even if you are unable to pay premiums.

· Accidental Death Benefit: With this additional security, an individual get an additional cover other than natural death, in case of an accidental death to give family an extra comfort.

· Tax Benefits: Term Insurance plans offer tax benefits on premiums paid up to Rs.46, 800 under Section 80C. Term plans with critical illness cover also offer additional tax benefits on premiums paid up to Rs.7800 under Section 80D. You also get tax benefits^^ subject to conditions under Section 10(10D) on the money that your family receives in case of an unfortunate event.

How to choose Best Term Insurance Plan?

While buying a Term Plan, we always have questions like which Term Plan is the best and how to compare the best Term Life Insurance Plan. Here are some parameters which may help to select the Best Term Insurance:

· Claim Settlement Ratio: This ratio is about the number of claims for life insurance have been settled (Claim paid) to a proportion of total claims received. The higher is the ratio, the better is the rating.

· Solvency Ratio: Solvency ratio tells you whether the insurer you choose will be financially capable of settling your claim if the need arises. As per IRDAI mandates, every life insurer should maintain a solvency ratio of at least 1.5.

· Critical Illness Benefit Rider: A critical illness like cancer or brain surgery etc. can cost a lot of money and increase the family’s finance burden. Critical illness benefits and protects your family by paying immediately on diagnosis. Only medical documents are verified for confirming diagnosis.

· Accidental Death Benefit Rider: If you have opted for Accidental Death cover, your family will get additional pay out in case of death due to an accident.

· Waiver of Premium Rider: In case the person covered by the policy gets affected by terminal illness, his/her future premiums are waived off.

Note – All details about Term Insurance, its needs, who can avail and what are key points to avail it.

One should follow below things.

1. Disclose all personal information correctly in underwriting, never hide anything and provide wrong information.

2. Disclose all previous medical conditions while availing critical illness benefit.

3. Disclose all present financial records properly to avail correct term insurance cover.

4. Present all the correct documents while submitting and claiming the insurance to avoid any mislead.

Personally mentioned all the above factors in the last to clarify that we check all the parameters of the Life Insurance Company while availing any insurance plan, but a single wrong information can fail your claim. This in turn change or reduce company’s claim settlement ratio.

We’re not talking from insurer’s side but insist you to provide right information and take full advantages of insurance.

Happy investing!!!