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Here's Why Term Insurance Is a Smart Investment

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November 08, 2016

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The rate of insurance penetration in the country is growing. With numerous private schemes and government initiatives, the number of lives getting covered is increasing by the day. Out of the many types of life policies, one of the most popular is term insurance plan.

Understanding term insurance

As the name suggests, term policies offer coverage for a specified term. In case of an unfortunate event of death of the policyholder during this period, the beneficiary is entitled to receive the sum assured amount. This amount is decided at the time of purchase of the policy. You may use any online term insurance calculator to determine the sum assured amount.

It is important to note that in case of survival of the policyholder during this term, the plan just matures. No survival or maturity benefit is payable during such an instance.

Term insurance: A smart investment

Many people often buy a term plan as their financial planner advises them to do so. But they fail to understand the importance of purchasing such a type of life insurance policy.

Following are five reasons why purchasing a term plan is highly recommended.

  1. Offers security against an unfortunate event

    Besides being ridden by grief and sorrow, the policyholder's family may be financially burdened in case of an unfortunate death. Buying a term plan provides them the much-needed financial security, and helps them meet their financial obligations quite easily.

  2. Provides benefits at the lowest price

    With a term plan, you may enjoy a high degree of financial protection at the best price. Term plans are the cheapest form of insurance available. This is due to the fact that the entire amount is used to provide life cover, thereby enabling you to enjoy maximum life coverage, while you pay the lowest premium.

  3. Acts as income replacement

    An individual may consider investing in a term plan, if he/she is the sole breadwinner in the family. In case of an untimely death of the policyholder, the sum assured amount acts as an income replacement. This helps the family meet their financial needs and carry on their lifestyle without much hassle.

  4. Offers additional coverage

    You may avail of greater coverage through various riders. Such riders supplement the coverage of the policy at an additional rate. Some of the common term plan riders include permanent or partial disability rider, accidental death rider, waiver of premium rider, and critical illness rider.

  5. Offers tax benefit

    For those looking to reduce their tax liability, term insurance is a highly recommended option. Premiums paid towards the term plan is eligible for deductions under 80C of the Income Tax Act, 1961 up to a limit of INR 1.5 lakhs. Therefore, you may purchase such a plan for yourself, your spouse, dependent children, and parents and enjoy tax benefits to a great extent.

The above points highlight the reasons for purchasing a term insurance plan. Investing in such a policy is indeed an essential part of financial planning.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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