Term insurance options to secure your family’s future

Term insurance plans offer a simple yet effective way to ensure financial security for your family in the event of your untimely death. These plans provide a substantial death cover at an affordable premium, ensuring that your loved ones are financially protected when they need it the most. With a wide variety of options available in the market today, it is important to understand how term insurance works, the different types of policies available, and how to choose the right one for your family.

What is term insurance?

Term insurance is a pure life insurance product that provides coverage for a specific term or period. Unlike traditional life insurance policies, term insurance plans do not offer maturity benefits or savings components. Instead, they are designed to pay a death cover if the policyholder passes away during the policy term. This makes them an ideal choice for individuals looking for a high sum assured at a relatively low cost.

The primary purpose of term insurance plans is to replace the income of the policyholder in case of death, ensuring that the family can maintain their lifestyle, meet daily expenses, and cover long-term financial goals such as children's education or home loans.

Types of term insurance plans

There are several types of term insurance plans available to suit different needs and preferences. Some of the most common options include:

• Level term plan: This is the most basic and widely chosen option. Under this plan, the sum assured remains the same throughout the policy term. The death cover is paid to the nominee in case of the policyholder’s death during the policy period.
• Increasing term plan: In this type of policy, the sum assured increases each year by a fixed percentage, providing more coverage over time. This option is suitable for those who want their insurance coverage to keep pace with inflation and growing financial responsibilities.
• Decreasing term plan: The sum assured decreases each year, which makes this type of policy ideal for those who have specific liabilities like home loans. As the loan amount reduces over time, the insurance cover decreases accordingly.
• Return of premium plan: Unlike traditional term insurance plans where no benefits are paid if the policyholder survives the term, this option refunds the premiums paid at the end of the policy term if the policyholder outlives the plan.
• Convertible term plan: This allows policyholders to convert their term insurance plans into another type of insurance plan, such as an endowment or whole life plan, after a certain period.

Benefits of term insurance plans

Choosing the right term insurance plan can offer several advantages, including:

• Affordable premiums: Term insurance is one of the most affordable policies. For a nominal premium, policyholders can secure a high death cover, ensuring financial protection for their family.
• Tax benefits: Policyholders can avail of tax deductions under Section 80C of the Income Tax Act for the premiums paid on term insurance plans.  With a policyholder's death during this period, insurance company pay the nominee the entire sum assured. Section 10(10D) avoids taxation on the sum assured and relevant bonus that the policyholder and his/her nominee receive.
• Flexibility: With several types of term insurance plans available, individuals can choose a policy that aligns with their financial goals and requirements. Whether it is a level term plan or an increasing cover plan, the flexibility allows for customisation based on personal circumstances.
• Add-on riders: Most term insurance plans offer riders or additional covers for enhanced protection. These riders include accidental death cover, critical illness cover, and waiver of premium cover. These optional benefits ensure that your family is covered for a wider range of contingencies.

How to choose the right term insurance plan

Selecting the right term insurance plans involves evaluating several key factors to ensure the policy meets your family's needs. Here are a few considerations:

• Assess your financial responsibilities: The primary purpose of term insurance plans is to replace your income and cover major expenses in case of your death. Take into account any outstanding debts (such as home loans), future expenses (such as children’s education), and your family’s monthly living costs when deciding the coverage amount.
• Determine the policy term: It is crucial to choose a policy term that aligns with your financial responsibilities. Ideally, the policy should cover the period during which your family is dependent on your income. For instance, if you have a home loan for 20 years, your policy term should at least cover that duration.
• Compare premiums: While term insurance plans are generally affordable, premium rates can vary across insurers and plans. It is important to compare the premiums and benefits of different policies to find the one that offers the best value for money.
• Consider add-on riders: Riders can provide additional coverage beyond the basic death cover. Depending on your needs, you may want to opt for riders such as accidental death cover, critical illness cover, or waiver of premium.
• Check the claim settlement ratio: A high claim settlement ratio indicates that the insurer has a good track record of paying out claims. Choosing an insurer with a high claim settlement ratio can give you peace of mind that your family will receive the death cover without delays.

Term insurance vs life insurance

While a term insurance plan and a traditional life insurance policy both provide death cover, they differ significantly in structure and benefits. Term insurance plans are pure protection plans, offering coverage for a specific period with no maturity benefits. On the other hand, traditional life insurance policies, such as endowment plans or whole life plans, combine insurance coverage with savings or investment components, which means they come with higher premiums.

For individuals seeking affordable and straightforward coverage, term insurance plans are often the better choice. However, if you are looking for a policy that also builds savings, a traditional life insurance policy might be more suitable.

Conclusion

Term insurance plans offer a reliable and cost-effective way to protect your family's financial future. With a wide range of options available, from level term plans to increasing cover plans, individuals can choose a policy that best suits their needs. Whether you are looking for basic coverage or additional protection with riders, term insurance ensures that your family is well-supported financially in case of your death. Understanding your financial responsibilities and comparing different term insurance plans will help you make an informed decision to secure your family’s future.

Disclaimer : T&C Apply - Bajaj Finance Limited (‘BFL’) is a registered corporate agent of third-party insurance products of Bajaj Allianz Life Insurance Company Limited, HDFC Life Insurance Company Limited, Future Generali Life Insurance Company Limited, Bajaj Allianz General Insurance Company Limited, SBI General Insurance Company Limited, ACKO General Insurance Limited, ICICI Lombard General Insurance Company Limited, HDFC ERGO General Insurance Company Limited, Tata AIG General Insurance Company Limited, The New India Assurance Company Limited, Cholamandalam MS General Insurance Company Limited, Niva Bupa Health Insurance Company Limited , Aditya Birla Health Insurance Company Limited, Manipal Cigna Health Insurance Company Limited and Care Health Insurance Company Limited under the IRDAI composite CA registration number CA0101. Please note that, BFL does not underwrite the risk or act as an insurer. Your purchase of an insurance product is purely on a voluntary basis after your exercise of an independent due diligence on the suitability, viability of any insurance product. Any decision to purchase insurance product is solely at your own risk and responsibility and BFL shall not be liable for any loss or damage that any person may suffer, whether directly or indirectly. Please refer insurer's website for Policy Wordings. For more details on risk factors, terms and conditions and exclusions please read the product sales brochure carefully before concluding a sale. URN No. BFL/Advt./23-24/569

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