The COVID-19 pandemic made everyone realise that life is short and fleeting. Therefore, it is necessary to plan your finances for such a crisis.
If you want to secure the future of your loved ones and ensure that they are well taken care of even if you are not around, then a term insurance plan might just be the solution for you.
There are two types of insurance. The first one is life insurance and the other is non-life insurance.
Non-life insurance can provide insurance cover for the vehicle, like fire insurance. Basically, life insurance means a cover on a person’s life, and term insurance is a type of life insurance wherein the insured person covers themselves for a specific time.
The main feature of term insurance is that in the event of an incident or death within the term insurance age limit specified and while the policy is active, death benefits of the insured person (i.e. the sum insured) will be passed on to the nominee (i.e. the person appointed by the insured to receive the benefits in case of unfortunate events).
Who Should Buy Term Insurance?
Our family members require our love and care; however, unfortunate events that can cause the policyholder’s death can’t replace the person but can surely replace his income. This is where term insurance comes into the picture. It is necessary for individuals such as:
- Every bread earner of the family
- A person who has people dependent on him/her or has a responsibility towards his/her family
- A person who doesn’t have a lot of investments
- A person who has debts
- It just doesn’t limit itself to these people. Every person must opt for such insurance to ensure that the family can cope financially even when they are not around.
What is the Right Time to Buy Insurance?
A general rule of thumb is that the premium will be less at an early age. Now, as a person grows, there is a likelihood that he/she might start getting susceptible to certain kinds of diseases. In such cases, your premium price is then going to rise. Hence, try to be insured at an early age when you are healthy so that your premium amount remains on the lower side.
Here is an example to understand why taking term insurance at an early stage is beneficial to you:
Assume that a person is currently 25 years old and has insured himself/herself for 35 years till the age of 60 years. The insurance premium amount at the age of 25 and that at 60 years is going to remain the same.
Tax Savings on Term Insurance
- Premium paid on term insurance is eligible for deduction from a person’s taxable income under Section 80C of the Income Tax Act.
- The amount of death benefit received by the nominee is exempt from tax under Section 10(10D) of the Income Tax Act.
What is the Right Cover and Quote of Insurance for Such Specific Cover?
There’s no exact rule for your amount of cover. However, as a thumb rule, we can say that the minimum amount should be ten times your annual income.
Whole Life Insurance Policy vs Term Insurance Policy
When comparing term plans versus other plans, we must understand which one is better for whom. So, let’s say your whole intention is to look at insurance from a pure protection point of view, and you are not interested in insurance from an investment perspective. Your priority will be getting a large amount of insurance cover with the lowest possible premium amount. So, a term plan can be the right option for you as it is the cheapest and most efficient way to cover a person’s life.
Conversely, if you want to have an insurance cover and an investment avenue along with such insurance, you should choose whole life insurance.
How to Buy a Policy from Different Insurance Companies?
For buying term insurance, you have two major options. One is, of course, going through the offline mode, and the other is by buying term insurance online. If you want to go for the offline mode, you have to approach an insurance agent. Whereas in online mode, you need to go to the insurance company’s website and enter the required details to know the eligibility and premium amount.
Here is a brush up on all key points you must keep in mind while buying a term insurance plan- knowing its importance to your family’s well-being and future, ensuring you buy it as early in life as you can, setting an amount of insurance cover well above all your liabilities and obligations, taking advantage on tax savings on premium paid and buying the insurance plan through the prescribed mode convenient to you (either by choosing to buy term insurance online or offline).