Term Insurance and its benefits
Term Insurance
Consider this you are driving on a highway in your brand new car singing along the latest tune beating down from your car’s radio and suddenly you see a person trying to cross the road just ahead of you, in a attempt to save his life you try and risk your life by putting on sudden breaks. And then......
Pure Term insurance is known as a pure risk cover plan. A risk cover plan because it helps you mitigate the financial problems associated with any life threat arising to you. Term life insurance not only it mitigates the risk but it also helps your loved ones to overcome that financial trauma which has arisen because of that particular risk.
The risk cover in term life insurance is commonly known as Sum Assured, which is pre determined amount of money which is paid to the designated nominee on demise of life assured. The risk cover of the term life insurance lasts till the end of policy period which could be as long as 35 years.
Why Buy Term Insurance?
Everybody believes nothing can happen to them, but there is always that element of concern or risk which prevails that, ‘What If?’ The term life Insurance is specifically bought to cover this concern of ‘What If?’ and all the financial trauma arising out of that risk.
The need to buy term insurance could be differentiated from a person to person, but the most common benefits which influence an individual to buy a Term Insurance plan could be defined as:
a. Term life insurance for a Secured family: If you are the sole bread earner of your family, term life insurance is must for you. In case something happens to you, the term life insurance policy will pay the cover to your loved ones. Through the term life insurance option, there would be no financial burden in your absence and your family could carry on their lifestyle.
b. Safeguard against liabilities through term life insurance: During our lives we take on a lot of liabilities to buy our home, buy a brand new car, etc. Many of these liabilities are usually paid over a period of time and in-case something happens to you the burden to repay these responsibilities comes directly on your family unless you have term life insurance. A term life insurance arms your dependents to manage aforesaid financial problems.
c. Nuclear Families benefit a lot through term life insurance: Unlike old times, there are far less joint families. These days, the only support system to your family could be you. If your don’t buy term life insurance, in your absence, circumstances could get very tough to handle. Term life insurance deals with any financial repercussions in your absence.
d. Term life insurance is Cheap: Unlike any other life insurance product you can buy term insurance plan very cheaply, e.g., a risk cover of Rs. 50 Lakhs for a Male age 25yrs could be as low as Rs. 4184 annually, i.e., less than Rs. 12per day. If you buy term life insurance early, the monthly premium can also come down.
e. Term life insurance gives you tax Benefits. A term insurance policy provides you Tax benefits u/s 80C & u/s 10(10D) of the Income Tax Act. Thus, when you buy term insurance you know, you’re actually saving money.
How much term life insurance cover do I need?
The general Thumb rule says a person should buy term insurance cover which is 8 times the annual income, i.e., if I today earn Rs. 5Lacs per annum then the amount of Term insurance Cover chosen should be around 40 Lacs.
Many term Insurance plans also offer you a possibility to increase your sum assured to an X% year on year, thus keeping you adequately insured. In order to calculate a more accurate value you can log on to www.policybazaar.com and check your exact term insurance cover requirement by using our term insurance calculator.