When it comes to securing your family's financial future, a term insurance plan is a must-have. It provides a lump sum amount to your loved ones in case of your untimely demise, ensuring that they are financially stable even in your absence. But with so many term insurance plans available in the market, how do you choose the right one for you? In this article, we'll discuss the top 7 things to expect from your term insurance plan.
Critical Factors to Know While Purchasing a Term Plan
Before we dive into the things to expect from your term insurance plan, let's first understand the critical factors to consider while purchasing one.
Coverage Amount
The coverage amount, also known as the sum assured, is the amount that your family will receive in case of your demise. It should be enough to cover your family's expenses, such as daily living costs, education expenses, and any outstanding debts. It is recommended to have a coverage amount of at least 10-15 times your annual income.
Policy Term
The policy term is the duration for which your term insurance plan will be active. It is usually between 10-40 years, depending on your age and the insurer's policies. It is essential to choose a policy term that aligns with your financial goals and provides coverage for the time you need it.
Premium Amount
The premium amount is the cost you pay to the insurance company to keep your policy active. It is calculated based on your age, health, and lifestyle habits. It is crucial to choose a premium amount that you can afford to pay regularly to ensure that your policy remains active.
Riders
Riders are additional benefits that you can add to your term insurance plan for an extra cost. These riders provide coverage for specific events, such as critical illnesses, accidental death, and disability. It is essential to consider which riders you may need and add them to your policy accordingly.
Top 7 Things To Expect From Your Term Plan
Now that we have covered the critical factors to consider while purchasing a term insurance plan let's discuss the top 7 things to expect from your term plan.
1. Affordable Premiums
One of the most significant advantages of a term insurance plan is its affordability. As compared to other life insurance plans, term insurance plans have lower premiums, making it accessible for individuals from all income groups. This allows you to secure your family's financial future without putting a strain on your finances.
2. High Coverage Amount
Term insurance plans offer a high coverage amount, ensuring that your family is financially secure even in your absence. As mentioned earlier, it is recommended to have a coverage amount of at least 10-15 times your annual income. With a term insurance plan, you can easily achieve this coverage amount without breaking the bank.
3. Flexibility to Choose Policy Term
Term insurance plans offer flexibility in choosing the policy term, allowing you to align it with your financial goals. You can choose a policy term that provides coverage for the time you need it, such as until your retirement or until your children are financially independent. This ensures that your family is protected during the most critical years of their lives.
4. Tax Benefits
Term insurance plans offer tax benefits under Section 80C of the Income Tax Act, 1961. The premiums paid towards your term insurance plan are tax-deductible up to Rs. 1.5 lakhs, reducing your taxable income. Additionally, the death benefit received by your family is also tax-free under Section 10(10D) of the Income Tax Act, 1961.
5. Riders for Enhanced Coverage
As mentioned earlier, riders are additional benefits that you can add to your term insurance plan for an extra cost. These riders provide coverage for specific events, such as critical illnesses, accidental death, and disability. By adding riders to your term insurance plan, you can enhance your coverage and provide additional financial security to your family.
6. Option to Increase Coverage Amount
As your income and responsibilities increase, you may need a higher coverage amount to ensure that your family is financially secure. Term insurance plans offer the option to increase your coverage amount at specific milestones in your life, such as marriage, childbirth, or buying a house. This ensures that your coverage amount remains adequate to meet your family's needs.
7. Peace of Mind
Last but not least, a term insurance plan provides you with peace of mind, knowing that your family will be financially secure even in your absence. It allows you to focus on your present without worrying about your family's future. This peace of mind is invaluable and is one of the most significant benefits of a term insurance plan.
Term Insurance Plan Features
Apart from the things to expect from your term insurance plan, it is essential to understand the features that make it a valuable investment.
Death Benefit
The death benefit is the lump sum amount that your family will receive in case of your untimely demise. It is usually tax-free and can be used by your family to meet their financial needs, such as daily living expenses, education expenses, and outstanding debts.
Maturity Benefit
Term insurance plans do not offer a maturity benefit as they are pure protection plans. This means that if you survive the policy term, you will not receive any payout. However, some insurers offer a return of premium option, where you can receive the premiums paid towards your policy at the end of the policy term.
Surrender Benefit
If you wish to discontinue your term insurance plan before the policy term, you can surrender it and receive a surrender benefit. The surrender benefit is the amount paid to you by the insurer after deducting any applicable charges. It is essential to understand the surrender charges before purchasing a term insurance plan.
Grace Period
A grace period is the additional time provided by the insurer to pay your premium after the due date. It is usually 15-30 days, depending on the insurer's policies. If you fail to pay your premium within the grace period, your policy may lapse, and you may lose your coverage.
Free Look Period
The free look period is the time provided to you to review your term insurance plan and return it if you are not satisfied with the terms and conditions. It is usually 15-30 days, depending on the insurer's policies. If you return your policy within the free look period, you will receive a refund of the premiums paid.
Conclusion
A term insurance plan is a valuable investment that provides financial security to your family in case of your untimely demise. By understanding the critical factors to consider while purchasing a term plan and the things to expect from it, you can make an informed decision and secure your family's future. Remember to compare different term insurance plans and choose one that best suits your needs and budget.
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