Family happiness is the ultimate goal for an individual, especially for the breadwinner of the family. Nothing can compensate for the emotional void or loss, but the financial loss can be compensated if the earning member of the family dies. Term Insurance is such a financial product that will be your rescuer in such situation!
In this article, we’ll be learning about-
➔ What is a Term Insurance?
➔ Why is it better than other policies in the market?
➔ Key factors one must consider before buying a Term Insurance Cover!
➔ Entitlements of having a Term Insurance
1. What is a Term Insurance?
Term Insurance is nothing but an income substitution. Here, you pay a premium for the life insurance cover. If god forbid the life assured/person dies, the family gets the huge sum of money as a death claim. The amount helps the legal heirs/ other family members to live comfortably after them. Your family will get financial assistance and thus this situation will be less burdening.
2. How is Term Insurance better than other policies available?
Term Insurance is a pure risk protection insurance cover. This is because it charges a very low premium but has a very high sum assured (life insurance cover). Let’s understand this with an antidote -a healthy, non-smoker person can get an insurance cover for Rs. 1 Crore by just
paying say 8000/- per annum.
While the other insurance products that mix investment and insurance, generally provide a life insurance cover of 10 times the annual premium. It means, that if you pay an annual premium of Rs 1 Lac per annum, then the life insurance cover will be only Rs 10 Lacs.
Hence, if you are looking to protect your family, against such risk then you must have a term insurance policy ONLY.
3. Key factors to consider before buying a Term Insurance Cover
1. Human Life Value
– Calculate the Human Life Value to find out how much insurance one should have?
2. Policy Term Period
– How long do you wish to have the cover? Do you want it until 65 only or do you wish to cover it for your whole life? The premium will vary accordingly.
3. Premium Comparison – Compare the premium along with the premium payment term. Nowadays, you have the choice of paying a premium within few years, so that the chance of policy getting lapsed gets reduced.
4. Features & Riders – Compare the feature and riders, pick few riders that you think are relevant & important to you.
5. Claim Settlement Ratio (s) – What has been the last 5 years’ claim settlement ratio of the company and how many days do they take to settle the claim.
4. Entitlements of having a Term Insurance
· Financial Security of your Family
Being the sole earner in your family indulges you with numerous responsibilities. Meeting the needs of your family becomes the main objective. Term Insurance brings you at peace with such thoughts. This financial stability after you will help them to cope up with their life, financially.
· Benefits on Taxation
Every taxpayer hopes that they could get some tax benefits. Well, apart from the protection to your family, with Term Insurance you can get tax benefits. As the government stated that “under Section 80C of the Income Tax Act, the premium that is paid for the Term Insurance is eligible for a deduction up to a maximum amount of Rs. 1.5 lakhs”. So, no matter what kind of policy you select under the Term Insurance policy, you will save taxes.