The recent outbreak of COVID-19 has adversely impacted people’s lives globally. The pandemic has forced people to focus on the need for good financial planning so that they can secure their family from any type of risk associated with lives and livelihoods. The best way to secure the financial future of your loved ones is to include a term insurance plan in the process of financial planning. And, in recent times the need of having a term insurance plan has become important more than ever. Read further to know in detail why it is a must to have term insurance plans.
Term Plan as a Part of Financial Planning
Financial planning is the process of meeting the financial objective with the help of the right management of the finances. Financial planning includes the aspects of retirement planning, wealth creation, protection, creating a financial backup for emergencies, planning to achieve specific milestones of life. But, where does the online term plan fit in this process?
The answer to this question is very simple, the term plan is one of the most important aspects of a robust financial plan. With the increase in age and responsibility, it becomes more important for an individual to protect their loved ones and term plan is the best way to do so. Whether you purchase an offline or online term plan, as compared to any other insurance product it provides the maximum coverage at the lowest premium rates. Moreover, the term plan provides financial assistance to the family in case of an eventuality and also take care of future liability even in your absence. Thus, it plays a vital part in the process of financial planning.
Benefits of Having a Term Insurance Plan
Let’s take a look at the benefits of having a term insurance plan.
Its Very Simple to Understand
A term insurance plan is the simplest form of insurance product that focuses on providing financial coverage to the family of the insured if the insured person dies an unfortunate death during the policy tenure. You just need to ensure that all the premiums of the policy are paid timely. As a pure life cover plan, there is no maturity benefit offered under the online term plan.
It is Super Affordable
As compared to any other insurance product, the premium rate of term insurance plans are lowest. It is as low as 0.1% of the total sum insured. Moreover, the term insurance plan offers higher coverage as compared to other insurance products. Due to its lower premium rate, it is super affordable and can be purchased by anyone and everyone without making a hole in the pocket.
Works as an Income Replacement
The term insurance plan works as an income replacement in times of emergency. For example, a married couple Ajay 30 years old is an entrepreneur and his wife Shilpa 28 is a homemaker. He buys a term insurance plan and name Shilpa as the beneficiary. If unfortunately, Ajay had an untimely demise, then Shilpa will not have to worry about the loss of regular income as benefits offered by the term insurance plan will come to her rescue. She can also choose to avail the death benefit as a lump-sum payment or as regular income and can continue to live her life fine.
Offers Higher Coverage
This is one of the primary benefits offered by a term insurance plan. The total sum assured for a traditional endowment or ULIP policies is about 7%-10% of the yearly premium. So for instance, if an individual purchases a ULIP or endowment plan for a yearly premium amount of Rs.20,000 then he/she can get coverage up to Rs.2 lakh, which is very low and can barely cover the family’s expenses. On the other hand, in the term insurance plan, one can get coverage up to Rs.1 crore for a yearly premium of Rs.10000. The coverage provided by term insurance plans is 60 times higher than traditional life insurance policies.
Offers Tax Benefits
While the main reason for purchasing term insurance is securing the financial future of your family, you also get to take the advantage of tax savings with them. The policyholder can claim tax exemption up to the maximum limit of Rs.1.5 lakh on the premium paid towards the policy U/S 80C of the Income Tax Act. In case you purchase a term return of premium plan, then you can claim tax exemption on the maturity benefit offered by the policy U/S 10(10D) of the IT Act.
The Bottom Line!
as discussed above term plan comes with several benefits. It is affordable, provides higher coverage, tax benefits, etc. However, before factoring in all the benefits it is important to keep in mind that the main objective of the term insurance plan is to provide protection and not savings. Thus, to ensure financial security to your family and to save then from any financial hardship in case of an eventuality, it is a must to include a term insurance plan in your financial planning process.
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