A term insurance policy is the simplest and most inexpensive form of life insurance available to an individual’s life. Under this policy, the insurer promises to pay a large sum assured amount to the nominee of the insured individual, in case the insured dies within the policy term.
There are many benefits of the term cover for families as well as the economy. The purpose of term cover ensures the economic safety of the dependents within the productive lifetime of the insured. Usually, for most individuals, this productive period is assumed to be life between 18 years. 60 years of age (65 years for the latest cases). So, anyone who has financial dependents, such as family members or business partners, should consider buying term insurance. It provides a safety net to ensure that your dependents are taken care of in case of your untimely death.
Therefore, a term policy will only cover the individual’s life for a limited period of approximately 40 years. Hence, the name ‘term cover’. At the expiry of the policy, the cover ceases to exist; i.e. if the insured dies after the tenure, or in other words, survives the policy tenure, nothing is payable to the insured or his/her dependents.
The term life cover can also be purchased by homogeneous groups (groups with similar characteristics). Such policies are known as ‘Group Term Insurance.
Affordable premiums
Term insurance policies are typically more affordable than other types of life insurance policies.
Flexibility
You can choose the length of coverage that fits your needs, and you can also select the amount of coverage that you need.
Tax Benefits
Besides offering coverage, term policies also offer tax benefits under Section 80C. For the annual premium paid and under section 10(10D) of the Income Tax Act for the amount received by the nominees.
Peace of mind
A term insurance policy provides financial security to your loved ones in case of an unexpected event such as your untimely demise of bread-earner in the family.
Easy to understand
Term insurance policies are easy to understand and transparent, with no hidden costs or charges.
Overall, a term insurance policy provides an affordable and flexible way to ensure that your loved ones are financially protected in case of your unfortunate demise.
Example Case of Term Life Cover
Living in Delhi, 32-year-old Shailesh is content with his life. He has a good career going for him, completing the picture are his beautiful wife, Vibha, and a little son, Ayan, whom he adores. Shailesh understands that being the sole provider of the family, his life, and his capacity to earn money are necessary to ensure a comfortable life for his spouse and a bright future for his son.
Therefore, he buys a group term insurance policy so that his family continues to enjoy a regular financial life even when he is not around. While deciding the sum assured of the policy, he considered the monthly household expenses and the higher education goals of his son and arrived at a figure of Rs. 2.5 crores.
While other life insurance policies would’ve cost him no less than Rs. 2.5 lakh (approx.) p.a., the term cover will cost him only Rs. 32,000 p.a. Therefore, well within his budget, and since there is no investment component generating maturity value. This premium will be a part of the household expense.
Rs. 2.5 Crore corpus will be able to generate an income of approximately Rs. 1 lakh per month for Vibha and Ayan. This income will be sufficient for them to maintain their lifestyles and achieve all of their financial goals in the future if Shailesh is not there to ensure the same.
