7 Benefits of Term Insurance for Long-Term Goals

Insurance is crucial to financial planning as it provides protection and helps you achieve your goals. Term insurance plans, in particular, offer a simple and affordable way to safeguard your loved ones’ financial future. With the rise of digital platforms, purchasing term insurance online has become easier and more cost-effective.

Want to know how you can maximise the benefits of a term insurance policy for your long-term financial goals? Keep reading to find out.

Key Advantages of a Term Insurance Policy

A term insurance policy offers multiple benefits and significantly reduces your financial burden. Here are the key benefits of term insurance plans:

Reasonable Premium Rates

Term plans are considered the most affordable option among life insurance policies. You can get higher life coverage for an affordable premium, which will help you ensure financial protection for your loved ones at a reduced cost.

Buying term insurance early on is advised to get the most affordable plan. The earlier you buy term insurance, the lesser the premium you will pay. Financial security early will help you maximise wealth and easily reach your goals.

Tax Benefits

You will be entitled to tax benefits under the Income Tax Act on the premiums you will pay for your term insurance. Also, the amount received by your beneficiaries will be entitled to deductions under the Income Tax Act.

The premiums paid towards critical illness coverage will also be eligible for a deduction of up to ₹25,000.

Replacement of Income

Term plans provide the option of paying the matured amount in parts. Your family members or beneficiaries can partially receive the maturity amount to have a regular income. It will be a regular monthly income, and your loved ones can be secured during distressed times.

Accidental Death Benefits

In the event of the policyholder’s death, the beneficiaries are entitled to a sum assured by the insurer. Term plans also offer accidental death benefits, which can help your family financially in case of unfortunate mishaps. Having a safety net during tough times ensures a stress-free life.

Coverage for Critical Illness

Term insurance plans also cover certain critical illnesses, and you can claim a lump sum payout if you are diagnosed with such a disease during the policy’s tenure. A financial net will help you with unexpected expenses during these unforeseen circumstances.

Coverage for Terminal Illness

If you have any terminal illness, it’s better to take coverage for that. It will allow you to get a portion of the death benefit during the policy tenure as financial help for any terminal illness you mention. If you face unexpected expenses related to such a disease, it will help you easily manage the burden during such tough times.

Convertible

Some term insurance policies offer the option to convert the term insurance into a life insurance policy. This flexible nature of term plans is beneficial if you face any financial trouble. You will be protected against any illness or unexpected expenses in the future.

Key Factors to Consider When Choosing a Term Insurance Policy

Choosing the right life insurance policy for yourself can help you optimise your plan to meet your financial targets better. Let’s understand the key aspects of an ideal term insurance policy.

•  Sum Assured Amount

The amount of sum assured is the most important factor to consider while buying term insurance. It’s the amount your beneficiaries will receive in case of unfortunate events. Consider your expenses and needs to decide the right amount for your loved ones.

According to the rule of thumb, your sum assured amount should be at least 10 to 15 times your annual income.

• Tenure of the Policy

The policy’s tenure is the duration for which you are assured financial protection from the insurer. It should match your financial needs and expenses. Consider your future obligations and expenses to decide the right tenure for yourself. Carefully determine your tenure where the years of major financial responsibilities are covered.

• Claim Settlement Ratio

The claim settlement ratio is vital for verifying the insurer’s reliability. If the insurer has a higher claim settlement ratio, then it is likely that your claim will be paid without any hassle. Always look for insurers with a 95% or higher claim settlement ratio to safeguard your family from unnecessary hassle.

• Riders Options

Riders are add-on features that provide extra financial coverage for unforeseen events, such as critical illness or accidental death. You can opt for additional financial security at a nominal cost. It will help lower your financial burden during unforeseen circumstances.

Life Insurance Vs. Term Insurance Plans

Life insurance offers comprehensive financial protection, combining coverage and investment. It provides a death benefit and the opportunity to accumulate cash value over time, making it suitable for those looking for long-term savings and wealth creation along with life coverage.

Conversely, term insurance focuses solely on providing a death benefit within a specified term. It is more affordable than life insurance and offers financial security for a limited period, making it an ideal choice for those looking for straightforward, budget-friendly protection.

Term insurance is a versatile tool for financial planning. It’s one of the simplest ways to secure your future. Examining all the above features and key factors is essential to buying an ideal plan and ensuring a safety net against unfortunate events.