The December annual report from the Insurance Regulatory Development Authority of India (IRDAI) shows that only 2.74% of Indians have life insurance.
Due to their ignorance of the term insurance tax benefits and how they operate, Indians have inadequate coverage. But, if the survival of your family members depends on your income, you must ensure their financial stability when you are no more. Also, term life insurance is one of the best tools for ensuring that your family never runs out of money, even in your absence.
Term insurance: what is it?
Term life insurance is a policy that only provides protection for a predetermined time in return for a predetermined premium sum. The insurer offers compensation if something untoward happens within this period. It makes up for the loss of your income to your nominee. One defining element of term plans is affordability. These programmes don’t have any investing components. The entire premium pays for the risk of the untimely passing away of the policyholder. Hence, a term plan offers substantial coverage at affordable prices. Therefore, term insurance can provide for the financial needs of your dependents in the event of an emergency, regardless of your budget.
Term life insurance: what exactly is it?
Your policy is your agreement with the insurance company under which you promise to pay the needed premium, and the insurer agrees to pay benefits if your beneficiary files a legitimate life insurance claim.
What is the term of the policy?
The length of your life insurance is known as the policy term. Your insurer pays the policy benefit to your nominee if an unfortunate incident occurs during this time. You can select the length of your term plan’s policy.
What is the process of term life insurance?
- The contract
Any term life insurance plan is a legal contract, known as a life insurance policy, between you and your insurance provider. The policyholder is the individual who pays for the term plans. You can purchase insurance for a member of your family or yourself. The life assured is the one whose life is insured. You, as the owner, are obligated to pay an agreed-upon premium to the insurer. In addition, if a complication arises while the policy is in effect, the insurer pays a specified death benefit to your nominee.
- Completing the request form
The following details must be included in the term plan application form:
- Medical background and state of health as of the latest date
- Lifestyle preferences, hobbies, age, annual income, and nature of work
The insurer evaluates the likelihood that your family would submit a life claim based on such information. It will not change your term insurance tax benefits. The following factors can increase the premium:
- An older age
- Unhealthy behaviours, such as smoking
- Risky activities, such as skydiving
- Risky careers
- Persistent health issues
- Determining your needs
- Choose your life insurance: Your insurance should be adequate to cover your dependents’ current and future demands.
- Choose the policy term: Determine how long your loved ones will require financial assistance.
- Choose a premium payment method: Insurance for term plans allows for a single payment of the entire premium. Alternatively, you can opt for recurring payments over the course of the policy or for a certain length of time.
- Decide on the payout choice: Your family can invest the remaining funds from a lump sum payment after paying off any existing debts. The profits can cover their living expenses. But you can choose a combination of a lump sum and a staggered payout if your family lacks financial expertise.
- Consider riders: With riders, you can add more base coverage for a slight cost increase. These add-ons offer supplemental payments for unforeseen events like the accidental passing away of the policyholder.
We hope you have followed how term insurance works so far.
- Examining the premium quote
The insurer gives you a rate quote based on your information. You receive coverage after you pay the premium.
- Meeting growing insurance requirements
Inflation is overcome through increasing term plans, which improves your coverage at predetermined intervals. Certain term plans enhance your life insurance coverage when your commitments rise at life’s major milestones.
- Choosing a nominee
You must indicate who will be given the financial benefits of your term plan.
We hope this article has simplified how term insurance works for you. Choosing the right plan can become the safety net for your family’s bright and comfortable future, even in your absence.
There are 2 tax regimes in India – new and old. Choose the correct one after consulting an expert to get the tax benefit you desire. You can opt for a regime change during the next financial year.
Visit the official website of IRDAI for further details.