The Long Read
Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)
Term insurance offers a host of benefits.
Simple - It’s a really simple financial product and quite easy to understand.
Affordable - It is extremely affordable but it will give your loved ones a significantly large insurance payout to help them avoid any financial crisis they may face after you pass away. For example: For just ~ ₹ 500 per month, you can get a life cover of ~ ₹ 1 crore life cover for your family.This payout can help them meet their regular expenses, pay off debts, if any, and maintain their standard of living.
Tax benefits - You can also avail tax benefits. That means, while providing your family with financial security, you will also end up saving a few bucks in the process.
Peace of mind - It offers the peace of mind that even after you are no longer present, thanks to your term plan payout, your family will be able to overcome any financial struggles that they may face after your passing away.
Simple. You can buy term insurance if:
You are 18 years old and above*
You are an Indian citizen - resident, PIO (person of Indian origin), or NRI (Non-Residential Indian)
You have an active source of income and can provide income proof to your insurer
*varies from insurer to insurer
Even if you are a homemaker without any active income, you can still get a term insurance plan, provided you meet the other eligibility criteria defined by the insurer.
Simple. You should always buy term insurance as early as possible because of the following reasons:
Your premium amount tends to be significantly lower than what you’ll end up paying if you buy it later. Find out the factors that can cause your term plan premium to increase.
When you’re young, you are more likely to be healthy. As a result, your chances of getting your term plan application approved by your insurer is also higher. Know the reasons why your term insurance application can get rejected.
If you apply for a term plan when young, the insurer will ask for a lesser number of medical tests. Result: A quick processing time!
Not at all. In fact, it is one of the cheapest ways to provide financial protection to those who are financially dependent on you, should you pass away unexpectedly.
For example, you can get a term insurance plan with a ₹ 1 crore life cover, for just ~ ₹ 500 per month as the premium*. ₹ 500 is typically less than what you pay for dinner at a fancy restaurant one time.
*(The premium and life cover amounts are indicative and depend on age, lifestyle, health status, and other factors)
Term insurance is generally extremely affordable and in turn, your family will receive a significantly large life cover amount if you pass away unexpectedly. This insurance money will provide financial security to your loved ones and will help them meet their household expenses and other financial goals without lowering their standards of living.
And your term insurance premium will remain unchanged throughout the policy duration, unless you change your life cover or any policy benefits.
And while it is true that term insurance policies do not give any survival benefit i.e. you or your family won’t get anything if you survive the policy duration, it still doesn’t mean your premiums would go to waste. Your term plan provides you with peace of mind because you know that your family will be financially secure even if you pass away suddenly. It will help you live life on your own terms.
Yes, of course. Let’s understand with an example.
When you are young, you may not have a lot of financial liabilities. But in a few years, the situation is likely to change -
You may be married with a child on the way
Your parents may be retired and relying on you for their care and medical expenses
You may have a home loan or a student loan to pay off
You will need to save up for your child’s higher education, wedding, and so on
With various life milestones, your financial responsibilities will keep increasing. If you pass away unexpectedly, your family will be struggling with these responsibilities, especially if you are the sole breadwinner.
Term insurance can help your family tackle not only their regular expenses but also these big future financial responsibilities such as paying off debts, meeting healthcare expenses and child education costs, etc.
Your term plan is like a financial backup plan that’s got your family’s back in your absence!
Yes, you do get tax benefits for buying a term life insurance policy. The benefits are:
Section 80C - You can get deductions of up to ₹ 1.5 lakh under Section 80C, for the premiums you pay for your term insurance policy.
Section 10 (10D) - The term insurance policy payout (i.e. the death benefit) given to the nominee is tax free. Hence they get the promised life cover in its entirety.
Section 80D - A deduction of ₹ 25,000 can be availed under section 80D for term plans. But note that this is applicable on the premiums paid for a term policy that come with health-related add-ons like a Critical Illness Rider.
Simple. Anyone who has family members depending on them for their income or caregiving should buy a term insurance plan.
For example, say you are one of the following:
The sole breadwinner of your family
Someone with loans and debts to pay off
A homemaker responsible for their family's caregiving
Someone with elderly parents to care for
Then you must buy a term plan so that in your absence your insurance money can help your family members/loved ones/financial dependents to avert any financial crisis.
Unfortunately, you will not get any returns if you outlive your term policy.
Your term insurance policy will only pay your family the life cover only if you pass away during the policy duration.
But, having said this, there is a certain form of term plan called TROP (Term Plan with Return of Premiums) that will refund only all the premiums you paid without any returns, if you outlive the policy.
There are four types of term insurance plans available:
Pure protection plan
Protection plans with changing cover
Protection plans with value at the end of the term
Protection plans covering more than one person
Find out in detail about the different types of term insurance plans from here to understand which type of plan suits your unique requirements. You can also speak to a life insurance company of your choice or an insurance advisor for further guidance.
Yes, of course! Incomplete financial protection can cost your family dearly.
If you opt only for employer insurance, credit card insurance, government insurance, mutual fund insurance, etc, the total amount from all these other insurance policies will not be sufficient to meet your family's financial needs in the event of your untimely death.
Whereas a term insurance policy, which is specifically created to protect your family financially, gives a payout amount that is significantly larger than the amount from multiple other insurance policies.
The lumpsum amount will help your family overcome any financial crisis they may face in your absence, especially if you are the sole breadwinner.
Yes, you should get a term insurance plan even if your spouse has one too.
Your unexpected demise can bring financial problems to your spouse and your family as well. Here’s how:
Your household income would be impacted if both you and your spouse were earning
If you or your spouse were not an earning member, then your family may need to hire additional help for taking care of young children or elderly parents
This is why you should buy a term insurance plan even if your spouse has one.
Term insurance is not an investment. It gives you no maturity benefit i.e. you or your family won’t get anything if you survive the policy duration.
Having said this, it is always worth buying it because it will protect your family financially and help you care for them even if you are no more.
Well, it’s a lot like asking if you should spend extra on airbags after buying a luxury car. Even if you have a solid financial plan with enough investments you still need to buy term insurance.
See, your financial plan will work and your goal-oriented investments will continue to grow only till you’re alive, especially if you are the sole breadwinner. If you pass away unexpectedly, your loved ones will be left with an inadequate nest egg which won’t be sufficient to make them financially secure in your absence.
This is where a term insurance plan will come in handy. The lumpsum payout from your policy will help you provide adequate financial protection to your family in your absence.
So keep growing your wealth with a robust investment plan, but don’t forget to include term insurance in it. After all, there’s no such thing as ‘too much safety’ when your loved ones are concerned!