How to Get Benefits From a Term Life Insurance Policy?- A Comprehensive Guide
.png)
Sudden death is enough to jeopardize your entire life’s planning, not only for you but for your family as well. You have to leave back numerous unfinished projects and considerable financial crises for your family. The best probable response to tackle such unprecedented situations is to maintain a term life insurance policy. It acts as a safeguard against possible financial crises under unfortunate circumstances.
What is a term life insurance policy?
A term plan is a kind of life insurance providing death coverage to the insurance holder for a particular period. If the insurance buyer passes away during the span of the plan, the nominee receives a lump sum. These plans usually do not offer maturity benefits like market-linked, money-back or traditional life insurance plans, although it offers enhanced coverage at a lesser cost.
How to get benefits from term insurance plans?
Term insurance plans are designed to offer you financial security in the face of emergencies. However, when investing in a term insurance plan, you need to ensure that you are buying the right policy so that you can enjoy the plan’s full potential. So, here are some tips on how you can get the maximum benefits out of a term insurance plan –
1. Compare and select the right plan
There are dozens of term insurance plans available in the market. Every plan has a different benefit structure and premium rate. So, compare the available plans rather than buying blindly. Choose a policy that offers a comprehensive scope of coverage that also matches your needs at premiums that are competitive.
For instance, if you are looking for enhanced protection, a term plan which has an inbuilt accidental death benefit rider or terminal illness rider would be a suitable match.
2. Choose the right sum assured
Term plans have the potential to give complete financial security provided you select the right coverage amount. There are different ways and calculations using which you can find the right sum assured. Have a look:
2a. Underwriter’s rule of thumb
Ideally, the rule of the thumb says that the sum assured should be at least 10 to 12 times your annual income. This is the most commonly used rule which is simple and effective. So, if your income is Rs.10 lakhs, you need coverage of Rs.1 crore to Rs.1.2 crores.
2b. Income replacement method
In this method, the sum assured is equated to the income that your family would lose if you are deemed to die today. For calculation, your current age, retirement age and annual income is considered. Here’s an example –
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
2c. Human Life Value
This is a more comprehensive approach in determining the sum assured. Under this value, the economic value of human life is assessed using the current income, expenses, assets and liabilities. This helps you assess the sum assured needed.
You can use either of these methods or online calculators to find the ideal sum assured of your policy. Make sure that you opt for the optimal sum assured so that your family does not suffer financial problems in your absence.
3. Opt for the longest possible term
Most term plans pay a benefit only in the case of death during the policy term. That is why it is always recommended to opt for the maximum possible tenure so that you can enjoy the coverage for a longer time. It also increases the probability of claim payment. Many term plans, nowadays, offer the whole of life option wherein coverage is allowed till 99 or 100 years of age. Opt for this option to enjoy lifelong coverage and complete protection.
4. Customize the premium payment term
There is, usually, no paid-up benefit under term plans. You stop paying the premiums and you lose the coverage and plan benefits. That is why paying the premium, regularly, is important.
Thankfully, term plans offer different premium payment modes. You can choose to pay a single premium, limited premium or regular premium. The premium payment frequency can also be chosen from annual, half-yearly, quarterly or monthly modes.
So, choose a premium payment term and mode which is most affordable for your pockets. This would ensure that you can pay the premium as and when it is due to avoid lapse and the subsequent loss of cover.
5. Add riders
There are different riders available with term plans. Riders are additional coverage features that adds to the scope of the policy and makes it more comprehensive. You can choose the riders that align with your coverage needs. Some of the riders that you can consider include the following –
|
|
||
|
|
||
|
|
||
|
|
6. Don’t forget to plan your taxes
Lastly, term insurance plans help in saving tax. So, don’t forget to plan your taxes when investing in the policy. If you are opting for a single premium, remember, premium up to 10% of the sum assured would only be allowed as a deduction under Section 80C. in limited and regular premium payment modes too, ensure that the premium is up to 10% of the sum insured, up to a maximum of Rs.1.5 lakhs so that you can claim a tax benefit on the same.
If you have opted for the critical illness rider, the premium paid for the same would be allowed as a tax-free deduction under Section 80D. The limit is Rs.25,000 if you are below 60 else Rs.50,000. So, know the tax benefits of your term plan to maximize tax savings.
If you use these tips you can unlock the full potential of a term insurance policy. So, invest in the right term plan, depending on your needs, and get peace of mind.
How to Get Benefits From a Term Life Insurance Policy
Term insurance is a life insurance policy that provides coverage for a specific period of time. The policyholder pays a regular premium for the term of the policy, and if the policyholder dies during the term, the death benefit is paid to the beneficiary. If the policyholder survives the term, the coverage ends and no benefit is paid out. Term insurance is a simple and affordable way to provide financial protection to one's family in case of the policyholder's death.
The benefits of a term life insurance policy include low premiums, flexibility, simplicity, and providing financial protection to the policyholder's family in case of their death.
The amount you can get for a term life insurance policy depends on a variety of factors, such as your age, health, and lifestyle, as well as the length and amount of coverage you choose. Generally, term life insurance policies offer coverage amounts ranging from a few thousand rupees to several crores, and the death benefit is typically paid out in a lump sum to the beneficiary. It's important to carefully consider your needs and budget when choosing a coverage amount and to shop around for the best premium rates and coverage options.
Author Bio
Paybima Team
Paybima is an Indian insurance aggregator on a mission to make insurance simple for people. Paybima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. Paybima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
Other Life Insurance Products
Latest Post
Showing care and love towards your loved ones can come in different forms, and purchasing a family health insurance plan is one of them. While there are several benefits of purchasing a family health insurance plan, finding one that suits your family’s needs can be confusing. Let’s walk through the top family health insurance plans to give you an insight.
Health insurance has become a household name in recent years, especially after the worldwide pandemic outbreak. People have understood the importance of having health insurance the hard way. This has significantly enhanced its popularity.
When it comes to financial planning, people often want to choose the best of both worlds: returns and security. If you have been looking for these two elements under one plan, then you would have come across ULIPs and Guaranteed Return Plans. While ULIP plans offer high returns, guaranteed return plans ensure stability and security. Which one is the most suitable for you? That's a topic worth discussing.
.png)
What about investing in a policy that promises the dual benefit of life cover and maturity benefit? That's exactly what an endowment policy does. All you need to do is save regularly to reap a lump-sum maturity benefit. Simultaneously, the policy also provides life cover to the assured. However, financial experts suggest that not every policy can be suitable for every financial goal.
When 29-year-old Shravan Kapoor planned to buy an endowment plan, he was quite sure he would be able to do that in a few minutes. However, when he opened the insurer’s website, he felt lost in the maze of endowment policies. Guaranteed returns, bonuses, maturity benefits, premium paying tenure, etc, all seemed a little too much to handle.
Speak to our Advisor
+91
