The incidences of all kinds of critical illness and all other kinds of diseases are on a great rise which very well highlights the importance of term plan. These kinds of policies can act as the most crucial contingency related plans for all the people so that financial risks can be mitigated in the unforeseen circumstances.
Financial planning is the most important thing to be considered by any particular person so that one can have proper and adequate coverage of insurance. All these terms like life-based insurance and term based insurance are unknown to several parts of the population. According to a study, approximately 75% of the Indians are not aware of the term life related insurance and those who are aware of them only 8% of the people have life insurance. The low penetration of insurance very well highlights the lack of financial awareness among people.
A lot of people fail to realize the significance of investing their funds into financial products like term insurance. This can also be called as a form of life-based insurance which provides coverage for a pre decided specific time period. The company will be paying complete amount to the nominee in case the insured person dies and if he/she does not die then the company will not be existing. There is no investment component into this and none of the maturity benefits is paid to the insured. Still, it is considered to be a good option to invest funds into.
Following are some of the reasons that justify this point:
-The least amount of cost associated with them: A lot of families cannot devote a considerable amount of money because they are a part of developing economies. So, for all such people, structured term insurance is one of the best financial products. There is no investment component in these kinds of insurance policies which will make them significantly cheaper in comparison to all other kinds of policies and financial products.
-The element of financial security: Most of the people in India are un-insured which means that people with insurance also do not possess the required and adequate amount of coverage. Sum insured is a very significant factor which helps in determining the whole amount of premium which the individuals are supposed to pay for the policy. But the introduction of term insurance has made the concept of financial security highly affordable to the people and they will be assured for a huge cover at a very low cost. With this point into existence, the individuals can live a secure life without being worried at any point of time in terms of security related to finances of the family.
– These kinds of policies also help to provide comprehensive amount of coverage: Even though term insurance is considered to be former life insurance it can also help to provide several functions of health insurance as well. So, the cover for critical based illness and accidental caused death along with disability can also be added to a term insurance-basedplan which is a great benefit and a very strong reason to invest funds into this option.
-The premium amount is fixed: The term insurance is a very basic product that helps to provide the basic function of securing the whole future of the insured people in terms of finances. A sum assured all the premium is never indexed into the whole market which makes it highly stable insurable product in the whole financial market. Once a particular insurance company accepts the proposal of the individual then the amount of the premium will remain the same throughout the whole time of the policy.
-It will provide the increased coverage of life: As the lifestyle is improved the needs of the family also change significantly. Same is the case with financial aid. Some of the insurance policies offer insurance related coverage linked with the life stages. The sum insured will automatically increase at a certain rate depending upon the age of the person who has been insured. So, this is a very good option to invest funds into.
– The element of flexibility: Each of the family has different needs especially the financial needs. Some people are interested in having a regular income source and some of the families are interested in having a lump sum amount. The terminsurance plans help to provide both of the options. Some of the people also go with option of paying a lump sum premium or they can also choose a part of the sum assured as a lump sum and balance in equal instalments. The premium can also be paid into a monthly or annual basis.
-It will help in paying all the liabilities of the person: A lot of individuals buy cars and houses with the help of finances. But in the whole race of improving the material condition a lot of people increase their liabilities. So, in the event of unfortunate incidents, these can become a liability for the family. But the terminsurance plans which have shorter tenures like 10 years can be taken to secure the family against these kinds of liabilities.
– They help to provide income tax benefits: The term insurance plan also comes with several kinds of income tax related benefits. The individuals can claim of deduction of approximately 1.5 lakhs under section 80 C of the income tax act, 1961. This section is concerned with the premiums which have been paid for the term insurance. The sum paid to the people is also exempt under the tax law under section 10 (10D) of the income tax law.
The whole concept of finding the best term life insurance depends upon the individuals after considering several of the factors. So, the individuals must go with these options because after investing funds into this option he or she can live a happy and stress-free life which will help in providing a guarantee that the family will leave a financially secure life even in the absence of the insured person.