Term Insurance is most popular and at the same time most misunderstood insurance products. Many people invest in term insurance just because their insurance advisor told them to do so. So, is term insurance is a smart investment to make as compared to other alternatives for the same?
What is Term Insurance?
It is a life insurance product which is a lot cheaper as compared to other life insurance instruments. Term insurance provides insurance coverage for entire life. Generally it requires payment of premiums for a predetermined time period, which is opted by the policyholder.
Types of Term Insurance
- Standard Term Life Insurance
It is the basic life insurance product which charges an annual premium to the policyholder. It pays out the sum assured on unfortunate event like death or fatal accident takes place. It does not carry survival benefit.
- Term Return of Premium Plan (TROP)
This is an improved version of Standard Term Life Insurance, where the premiums paid are paid back, where the policyholder survives the term.
- Group Term Insurance Plans
This is generally designed for companies, businesses, associations, etc., which have many numbers of people associated with such an entity. These are customized plans, where the insured can claim for critical illness also (if covered by the plan).
- Convertible Term Insurance Plans
These plans allow dual benefits of insurance coverage as well as an investment option. This plan gives an option to the policyholder in later term for opting for whole life insurance or endowment policy. Such a plan can be offered as an additional rider alternatives to the standard term insurance plan.
- Joint Life Term Insurance plan
Instead of buying separate life insurance policies for husband and wife, this plan offers dual insurance coverage for both of them. It is a better alternative as it provides for insurance cover to the surviving spouse, even where another is no more.
There are still various other term insurance products, which are not mentioned above. Such products are customized as per industry and clients demand (like TROP plans).
Why you should opt for Term Life Insurance?
Term Life Insurance is a necessity, because it will secure your family’s future when you are unable to take care of them. Term Life Insurance provides the coverage where the insured passes away or in some of the cases, where the insured meets with an accident resulting in severe disability. Most of the Term Insurance Plans have a clause where the insured receives the money if he or she is diagnosed with any critical illness.
- Term Insurance provides with that much needed cushion for your family, which will facilitate to manage day to day activities, even when you are not there to take care of them.
- Term Insurance provides tax benefits under section 80C to the insured. Additionally, premiums paid for critical illness cover will be eligible for tax deduction under section 80D. However, you need to consult your financial advisor for detailed benefits and their upper caps for claiming these deductions.
- Flexible policy terms can do wonders for you. The insured needs to identify the appropriate time period, depending upon his age, family needs, preexisting diseases, etc. Longer tenure will allow the insured to enjoy cheaper premiums throughout the life.
- There are various types of Term Life Insurance like TROP or joint term life insurance, etc. The insured shall go over each type to locate the most appropriate type of term insurance. This will give an extra edge. For e.g. if any person opts for joint life insurance, then he will be eligible for cheaper premiums as compared to single term insurance. At the same time, the surviving spouse will have insurance cover, even where another is gone.
- When the insured enters into insurance plans in his earlier phase, he will have the same premium locked in for his entire life, which would be much cheaper at such age.
- Nowadays, the insurance industry is adapting itself to the changing customer needs. Survival benefit plan or survival rider is one of such change introduced by the insurance companies. TROP offers the death benefit to the insured’s family and premiums payback to the insured, in case he survives at the same time, in one policy. This just makes insurance policy attractive than a plain vanilla term insurance. This is an attractive investment alternative for those who wish to combine insurance with savings benefits.
- Additional rider benefits are allowed on some of the term insurance policies like group term insurance plans, etc. Such additional riders may contain critical illness clause or accidental disability clause or accelerated sum assured on certain events happening. These riders come at a lower cost as compared to whole insurance plans for the purpose.
Term Insurance comes with dual benefit – one is life insurance and another is investment benefit. So, if you wish to invest smartly in Term Life Insurance, then you can go online and browse through various alternatives which will give you an overall view as well pros and cons of any policy.
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