Securing your family’s financial future has become increasingly important, especially given India’s rising cost of living. Purchasing term life insurance is one of the easiest and most cost-effective methods to secure your loved ones’ financial security, even if you are not present.
A term plan calculator can help you estimate the right coverage based on your financial responsibilities and lifestyle needs. Let’s dive into five compelling reasons to buy term life insurance and how it can safeguard the future of those you care for the most.
- Affordable premiums for comprehensive coverage
Term life insurance is known for being inexpensive because it offers people high coverage at low premiums. Term insurance is different from traditional life insurance policies in that it offers a death benefit only (no investment component) and that thereby keeps premiums affordable.
This affordability is especially helpful for young professionals and families who want to take care of their loved one’s future while keeping their finances intact. For instance, a 30-year-old non-smoker might get a ₹1 crore policy for about ₹10,000 a year. It is easy to customise the premium and coverage according to your budget and needs using a term plan calculator and you can get the best protection without overspending.
- Financial security for dependents
In India, where many households depend on a single income earner, the loss of income can be disastrous to family finances. With a term life insurance death benefit, your dependents will receive a lump sum payout to help cover their ongoing needs, and in turn, you will have provided a reliable financial safety net.
This payout can cover basic expenses such as daily living costs, children’s education, healthcare, and even retirement planning for your spouse. For example, if you have a ₹1 crore term plan, your family will have a substantial sum to live as you intended, pay off debts, and handle any unforeseen expenses. A term plan calculator can also be used to assess the family’s financial needs and select a coverage amount sufficient to meet the future needs of your family.
- Debt repayment assistance
Finances are riddled with loans in India with people taking loans for education, home ownership, and vehicles among many other things. In the event of the untimely death of the policyholder, these debts can be a heavy burden on the family. A term insurance policy with adequate policy sum assured can also serve as a debt shield and help your family pay off the debt without putting them under financial stress.
For example, if you have a home loan of ₹50 lakh, a term plan with a similar coverage amount will ensure that your family has the resources to clear the debt in your absence. This debt repayment capability brings peace of mind, knowing that your family won’t be overwhelmed by financial liabilities.
- Tax benefits under tax laws
Term life insurance policies in India also have a lot of tax advantages, which makes them financially better than just covering the benefits. By Section 80C of the Income Tax Act, policyholders are permitted to deduct a maximum of ₹1.5 lakh from their premium payments. Also, the tax on the death benefit paid to beneficiaries from Section 10(10D) ensures that the lump sum is available to your family to the full extent.
The double advantage of these tax benefits makes term insurance a sound choice for individuals wanting to save taxes and protect their family’s financial future. With a term plan calculator, you can precisely know the premium amount and precise tax savings.
- Flexibility with additional riders
Term insurance policies are flexible and can be customised with riders to augment the coverage on the terms of individual needs. Term insurance is a ‘rider’ product, which means you can add on a ‘rider,’ or additional benefit, to make it more comprehensive. For example, a critical illness rider pays out if you are diagnosed with a serious illness such as cancer or heart disease.
There is also an accidental death rider that will provide additional financial protection if death results from an accident. Another popular type of rider is a waiver of premium, which waives the need to pay a premium if you become disabled. These riders add a multi-layered protection plan to your term policy as life changes with time.
How to buy the best term life insurance? Key points
Buying the right term insurance plan involves understanding your needs, assessing options, and making an informed decision. Here are five essential steps to help you choose the best term insurance:
- Assess your coverage needs
To begin with, calculate how much coverage you’d need that would allow your family to keep living their same lifestyle in the event of your absence. Your family’s monthly expenses, outstanding debts, and children’s education (or any other future financial goals) are all factors to consider. As a rule of thumb, you should pick a coverage that is 10 to 15 times your annual income. A term plan calculator can help you to get a more accurate estimate of the amount that you can afford to pay in keeping with your liabilities and your requirements.
- Choose the right policy tenure
You need to have your policy tenure in alignment with your financial responsibilities. Let’s assume that you want to retire at the age of 60; choose a term for which you will be covered till that age. You should also think about how long any ongoing loans, or other financial obligations, will last. The tenure you choose to select will provide your family with enough support so that they can be financially independent.
- Compare premiums and benefits
Premiums can vary across insurers, so comparing options is essential to find the best value. Look for policies with affordable premiums and maximum coverage. Compare term insurance plans online side by side using online platforms to check premium waiver benefits, lump sum payouts and optional riders. Check whether the premium fits into your budget without reducing the scope of essential coverage.
- Check claim settlement ratio and insurer reputation
A claim settlement ratio (CSR) is the percentage of claims an insurer has been able to settle. The higher the CSR, the more likely the insurer is to honour claims promptly and therefore the more reliable. Ensure you choose a reputable company by reviewing a review of insurers’ CSRs, policyholder reviews and customer support services. If the need arises, having a high CSR from a well-regarded insurer can give you confidence that your claim process will be smooth for your family.
Ending note
Purchasing term life insurance in India is an important financial choice, providing comprehensive coverage to protect your family’s future. With low premiums, financial security for dependents, and debt repayment aid, term insurance assures that life’s uncertainties do not put your loved ones in financial danger.
Furthermore, tax benefits make it an appealing option for long-term planning, and the availability of riders allows you to tailor coverage to your specific needs. Term life insurance is a simple action that may have a huge influence on your family’s financial security and peace of mind.
