A term life insurance policy is basically a financial protection plan. It is designed to ensure the financial security of the policy holder’s family in the event of their death.
How does term life insurance work?In essence, term insurance policies are simple. The policy holder — the person whose life is insured — pays the premiums, and is covered for a fixed period of time, the plan term chosen. If the policy holder dies during the tenure of the plan, their nominee is entitled to receive an assured amount of money known as the death benefit. This assured sum is the amount of insurance cover chosen by the policy holder at the time of purchasing the policy.
Term life insurance only provides coverage against risk of death. In other words, the death benefit under this plan is payable only if the person insured, dies. If the policy holder survives until the end of the term, the plan matures and no benefits are payable to them or to their family.
Are there any financial benefits?Term insurance plans provide pure financial protection, and are not investment policies. There is usually no savings component to them, and they typically offer no maturity or other benefits at the end of the policy term.
Is there a tax benefit?Yes. Premiums paid for all life insurance policies are exempt from tax up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961. The death benefit that the nominee receives in case of the policy holder’s demise is also exempt from tax under Section 10(10D) of the Income Tax Act, 1961.
Are term plans expensive?No, term plans are actually one of the most affordable types of life insurance available in India. The policy buyer is covered for a large sum assured for a relatively lower premium. They are cheaper than whole life insurance plans because they provide pure financial protection, with no additional benefits.
Are there different types of term insurance?Term life insurance policies can be broadly classified as:
- Level term plans
- Return of premium plans
- Increasing term plans
- Decreasing term plans
- Convertible term plans
- Term plans with riders
Term plans differ based on coverage and type of benefit they offer, and are designed to meet the various insurance needs of buyers.Before buying an insurance policy, be sure to do in-depth research, and know your requirements and options. If needed, consult a qualified financial adviser, who will clear your doubts or questions, and help you pick out the right kind of insurance.
Learn more about different Online Term Insurance Plans here.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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