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Benefits of Term Insurance
Table of Content
1. What are the benefits of term insurance plans?
2. What are the Major Benefits of Purchasing a Term Insurance Plan Early in Life?
3. How to choose the right term insurance plan?
4. How to Select the Best Term Insurance with the Right Sum Assured Option?
What are the benefits of term insurance plans?
Here are the top 10 term insurance benefits:
- Affordable Premiums
- Financial Protection
- Income Replacement
- Whole Life Coverage
- Tax Benefits
- Accident insurance benefit
- Multiple Death Benefit Payout Options
- Riders and Add-ons
- Critical Illness Coverage
- Different types of term insurance
1. Affordable Premiums
You can get a high-quality term life insurance policy by paying very low premiums. Payments for premiums can be made on a monthly, semi-annual, quarterly or on an annual basis. The amount of the premium you need to pay for a term insurance plan depends on your age, cover amount, tenure and other factors. You can use a term insurance calculator to calculate the applicable premium for your desired life cover.
2. Financial Protection
One of the most critical term insurance benefits is the peace of mind it gives to the policyholder, knowing that your family and loved ones’ financial future is secured in your absence.
3. Income Replacement
Term insurance's maturity benefit in the form of cover amount acts as income replacement for the policyholder's family/other nominees. With the help of that cover amount as survivor support, whether it's in lakhs or crores, the financial needs and future of your family remain secure. Given that you can choose to get the maturity amount in parts as well instead of lumpsum, it acts as an income replacement and does not let the financial future get jeopardised. The big cover also helps in wealth preservation and estate planning for the nominees' future.
4. Whole Life Coverage
Term insurance plans offer coverage for as high as 99 years known as whole life insurance. Technically giving whole life coverage for the policyholders.
5. Tax Benefits
Another added bonus of buying term life insurance is the availability of income tax benefit. Premium that you pay for term insurance is eligible for tax deductions under 80C of Income Tax Act. Also the maturity amount received is tax free.
6. Accident insurance benefit
Another advantage among the term insurance benefits is accident insurance rider. You can upgrade your term insurance policy to include the Accidental Death Benefit Rider. This will provide a defence against future accidents through the sum assured.
7. Multiple Death Benefit Payout Options
The policyholder may select a lump sum payout, a monthly, quarterly or yearly income, a combination of lump sum & income, or an increasing income at the beginning of the payout.
8. Riders and Add-ons
There are riders available for term insurance plans that allow you to increase the term life insurance benefits of the basic coverage. For a small extra premium, you can include these riders in your term insurance policy.
Certain insurers offer a waiver of all future premiums in the event of dismemberment or diagnosis of one of the designated critical illnesses, for instance.
9. Critical Illness Coverage
If your term insurance plan has an optional Critical Illness Rider, you will receive a lump sum payment upon the diagnosis of any covered critical illness.
10. Different types of term insurance
There are various types of term insurance: Level Term Plans, Increasing Term Insurance Plans, Decreasing Term Insurance, Term Insurance with Return of Premium, and Convertible Term Plans.
What are the Major Benefits of Purchasing a Term Insurance Plan Early in Life?
Low Premium
One of the biggest term insurance benefits is this. The earlier you buy term insurance in life, the lesser amount of premium you need to pay for that cover. That is why it is recommended to buy it at an early age, like in your 20s. With a term insurance for housewife, housewives can avail term insurance at cheaper premiums.
Long Coverage Period
Another benefit of purchasing term insurance plan early is that you get higher possibility of longer coverage period, since your current age is lower. For example, a person aged 25 may get a higher cover of say 80-90 years, whereas a person buying term insurance aged 40 may not get such a long coverage. Also, the longer the cover tenure is, the longer is the risk coverage of your plan.
High Sum Assured
By buying term life insurance while you’re young, you can meet the term insurance eligibility criteria for a higher sum insured. Since age is on your side, insurers may see you as a lower-risk customer, offering a higher coverage amount, which is one of the key benefits of term insurance.
How to choose the right term insurance plan?
There are many different term insurance plans with various benefits available to choose from. It would be beneficial, though, if you did not take a one-size-fits-all approach when considering how much term insurance do I need to maximize the advantages of term insurance.
Based on your financial obligations, you should obtain enough life insurance, including the best term insurance plan for 1 crore, and choose the right add-ons based on the type of coverage you need. Before you purchase a term insurance policy, make sure you are aware of and comprehend the many aspects associated with doing so, whether you do so online or offline. Factor in your age, cover amount and tenure requirement, riders, availability of flexible policy terms, and other benefits before zeroing in on any insurer.
How to Select the Best Term Insurance with the Right Sum Assured Option?
As a rule of thumb, purchase a term insurance policy which has all the features and benefits that you need, coupled with a lower premium. The coverage in the form of an insured sum should ideally be equal to or greater than 10-15 times your yearly income. For instance, to get the most out of a term insurance plan, you should choose an adequate life cover of at least Rs 1.5 crore- 2.25 crore if your annual income is currently Rs 15 lakh.
Why to Choose the Right Term Insurance Plan?
Term insurance policies offer financial assistance to the family of policyholders at an affordable rate within the mentioned period. Moreover, you get comprehensive life coverage at low premium rates with this type of insurance plan. Thus, if the policyholder dies during the policy term, the nominee is paid an assured sum as a death benefit.
To gain a thorough understanding of term insurance, make sure to check its features and benefits before you opt for the plan.
Insurance Coverage Against Uncertainties
Opting for a term insurance plan provides financial assistance to family members under certain unforeseen circumstances like the policyholder’s death or disability due to an accident. One can however easily opt for significant life coverage for a small premium payable with a term plan.Provides Coverage for Critical Illness
As you age, you have a higher chance of being affected by critical illnesses such as cancer, heart attack, and cardiovascular disease. All these disease treatments are not only time-consuming but are also expensive. Opting for a term insurance plan provides you coverage with a critical illness rider.
A critical illness rider offers you additional benefits when you apply for it with a regular-term insurance plan. Under this rider, if you are diagnosed with an illness, you will be paid a lump sum amount for treatment without exhausting your savings.Provides Add-on Riders
When choosing to opt for a term insurance plan, you can add on riders with the plan. Choosing a rider will let you avail additional premium benefits with comprehensive coverage.Offers Tax Benefits
There are several tax benefits available on life insurance, including tax deductions on premiums under Section 80C of the Income Tax Act 1961 of up to Rs. 1.5 lakh. Moreover, with critical illness coverage, you can avail tax benefits under Section 80D of the Income Tax Act on the premium paid.
The death benefits received by a policyholder's family members are also completely tax-free as per the provisions of Section 10 (10D) of the Income Tax Act.Offers Multiple Payout Options
When you opt for any term life insurance plan, it is necessary to pay a fixed amount at the beginning to avail benefits. Here, you can choose monthly, yearly, or quarterly payouts. This provides you with the maximum flexibility of paying premiums.
FAQs on Term Insurance Benefits
Q: What is the benefit of term insurance?
The benefits of term insurance plan are multiple, such as premium affordability through low premiums, multiple payout benefits, customisable plan, return of premium option, riders/add-ons, and income tax benefits.
Q: What is covered in term insurance?
In case of your untimely demise, the life cover amount of term insurance plan will provide a predetermined sum to your loved ones named as nominees. Besides term insurance benefits such as death benefit, term insurance plans can also cover critical illness and accident insurance.
Q: Does term insurance have maturity benefits?
Given that the very nature of term insurance is to cover your nominees for the tenure of the plan, term insurance does not usually offer maturity benefits. But survival benefits can be there if you choose the return of premium option which nowadays is available in term insurance plans.
Q: What is the best age to buy term insurance?
The simple answer is, as early as you can. The earlier you buy, like in your 20s, the lower your premium can turn out to be. One of benefits of term insurance is its affordability through such low premiums.
Q: What is the best amount for term insurance?
A term insurance plan should ideally cover at least 10-15 times your annual income.
Q: Can I purchase multiple-term insurance plans?
Yes, you can purchase multiple-term insurance plans considering your respective insurance requirements.
Q: What are the optional term plan benefits?
Riders are optional add-on benefits you can include with your term insurance plan. At an affordable premium rate, you can opt for riders for financial security against any accidental death, critical illnesses, costs of hospitalisation, and others.
Q: What is the difference between the benefits of term insurance and life insurance?
There are some differences between the benefits of term insurance and life insurance. With a term insurance plan, you can avail simple life coverage. On the other hand, there are many types of life insurance plans, which provide additional benefits, such as return of premium, guaranteed returns and substantial profits via investment.
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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.
Written By:
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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Here are a few more articles about Term Insurance.
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##Individual death claim settlement ratio by number of policies as per audited annual statistics for FY 2023-24.
#Provided we have received all the relevant and required documents and no further investigation is required. Claim settlement process would be completed within stipulated timelines once the claim request is approved
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***Online Premium for Life Option for HDFC Life Click 2 Protect Super (UIN: 101N145V04), Male Life Assured, Non-Smoker, 20 years of age, Policy term of 25 years, Regular pay, Annual frequency, exclusive of taxes and levies as applicable. (Monthly Premium of 622/30=20.7).
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