Term life has several benefits that are unmatched:
1. It is the cheapest form of life insurance. Consider the table below:
2. Premiums are tax exempt under Section 80C and death benefits under Section10(10D) (at present). All the recent tax changes have recognized the special nature of term life and protected its tax benefits. This is not true for other products. As an example, unit-link products where the sum assured is not more than 5 times the premium paid are not eligible for tax benefits on premium paid and maturity benefits.
3. No surrender penalties if a term life product is discontinued. A customer can stop paying premiums at any time on a term life policy. There are no charges although the life insurance policy will lapse. This is not something that we would recommend because term life policies are always good to have and best bought early. However, customers do have an option.
Term life policies are of two kinds – regular and ‘with return of premium’. In regular term policies there is no benefit paid if the policyholder survives the policy term. However, in the return of premium product, the premiums paid during the duration of the policy are paid back to the customer. We prefer regular term as they are much more cost-effective but if you want a term with return of premium we'll get that as well for you.
The video below describes the magic of term life insurance.