Term insurance is an excellent financial tool to secure your family’s financial future in the event of unforeseen events. In this article, we’ll look at how term life insurance works, its benefits, and its importance in providing financial security for the lives of your loved ones.
What is a term insurance policy?
A term insurance plan is a legal agreement between the insured and the insurer. According to this agreement, the insurer provides the insured sum to the agent of the policyholder in the event of the latter’s death during the mandate.
There are many companies that offer different types of term insurance policies. A term insurance policy is also one of the most affordable life insurance plans you can buy. Therefore, it is important to understand what exactly they mean and what would be the ideal policy for you and your family.
Advantages of the term insurance policy
Life coverage is the most important benefit offered by term insurance. In the event of the death of the policyholder during the term of the policy, his agents may receive a sum insured.
By purchasing a term insurance policy, you can save up to Rs. 1.5 lakh on premium payments under Section 80C of the Income Tax Act. In addition, if you opt for the critical illness increase, you can benefit from additional tax advantages.
Some companies distribute a monthly or yearly installment of the sum assured in case the candidate cannot manage a large lump sum at one time.
If you buy a term insurance policy and now want to add another benefit to it, you can buy an endorsement with your policy. For example, you can purchase the critical illness add-on. If you choose to get this add-on, a particular amount will be paid to the policyholder for treatment if needed.
Types of Term Insurance Policies
This is the most popular type of term insurance. The sum insured here remains the same for the duration of the contract. The younger you are, the lower the premium will be.
This type of plan is usually purchased by large organizations, unions, etc. The benefits remain the same as a standard term plan.
Some policies reimburse the entire premium paid by the insured in the event that he survives the term.
- Ascending and descending term plans
The increasing duration plan offers an option to increase the sum assured at certain times. This plan can be used keeping in mind that inflation increases the price and cost of living and ensuring that your family can meet the increasing demands of life.
The decreasing term plan can be used when you have debts, such as loans, that need to be repaid. Here the sum insured will gradually decrease.
This can be advantageous because liabilities tend to decrease as you grow, and you may not need the same amount of life insurance coverage for the term. Therefore, you can choose to reduce the amount of life coverage as your liabilities decrease with this plan.
If you buy a standard term plan but want to convert it to a whole life insurance policy, you can use this option. You can also use it to convert to any other plan. It is usually used when you expect your financial situation to improve, in which case you can opt for a better term insurance plan.
In conclusion, a term insurance policy is one of the easiest ways to secure your family’s financial situation in the event of an untimely crisis. It is an indispensable tool that can guarantee the safe future of your family in your absence.
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