Life is full of surprises. Ever since the dawn of the Covid pandemic, it has become increasingly clear that everything can change in the blink of an eye. That means you need to protect your assets, secure the future of your family and also prepare for tough times that may befall you at any moment.
Financial planning is the viable solution to prepare for all the unexpected circumstances, and a term plan is where it all starts. So, let’s take a look at term insurance benefits and how the simplest policy plan can help you during tough times.
What is a term plan?
A term plan is a form of life insurance policy. It is the most affordable form of life insurance that allows you to take your circumstances into account and choose the types of plans that work best for you.
You start by selecting the sum assured that will be a sufficient amount to support the lifestyle of your loved ones in the event of your unfortunate demise. You can select the policy term that befits you from 10-99 years, based on your health, critical illnesses, etc.
Upon making these simple choices, the insurance provider will help you with a reasonable rate of premium that you must pay periodically or as a lump sum one-time investment based on the type of plan you choose.
In the event of your demise during the policy term, the insurance provider will pay the sum assured as a death benefit to your beneficiaries, i.e., your loved ones. If you feel that you may survive the policy tenure, you can add the ROP rider which pays you the return of premium as a maturity benefit when the policy terminates.
The simplicity and affordability of term plans coupled with the numerous benefits makes it one of the top choices for financial planning and preparing for tough times.
What are the term insurance benefits of the different types of policies?
The term insurance benefits far surpass the generalised life insurance policies. Different types of term plans offer different benefits. Let’s discuss them in detail:
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Increasing Term Plan – This is a term plan with forethought. The rate of inflation affects the value of the Indian Rupee and with that in mind, the increasing term insurance benefits help your loved ones circumvent the economic crunch.
Every year during the policy tenure, the sum assured increases by a specified percentage of your choosing. The longer you survive during the policy tenure, the higher the death benefit that your beneficiaries receive in the event of your premature demise.
Increasing term insurance benefits:
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It helps beat the rate of inflation.
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The higher sum assured can be used to repay debts and liabilities and there is still enough money left over to plan for the future.
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With ROP, you receive a lump sum amount when the policy matures. You can use the money to rid yourself of liabilities and debts and invest in your family’s future once again.
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The premium you pay is tax deductible up to INR 1.5 lakhs so you save money in real time.
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Decreasing term plans – These term plans are the exact opposite of increasing term plans. They are best coupled with loans and liabilities.
Every year, your sum assured decreases by a certain specified amount. This amount is used to repay your debts to different lenders. Your premium remains constant therefore with the same amount of money you decrease your liabilities and secure your family’s future all at once.
Decreasing term insurance benefits:
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It helps you repay your loans without the need to allocate additional funds.
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Over time, loans and debts are reduced. Therefore, when your beneficiaries receive the death benefit, they have fewer liabilities to worry about.
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If you survive the tenure of your policy, you receive the remainder of the premiums you paid as a maturity benefit. You can use the money to clear any outstanding liabilities or invest to secure your family’s future once again.
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The premium is tax deductible, and so is the death benefit and maturity benefit.
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The premium is affordable and serves two important purposes of securing your family’s future and ridding you of debts.
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Single premium term plan –
This is a very simple term plan that allows you to secure your family’s well-being with a single payment plan. You need to pay the premium only once in a lump sum amount and choose your policy tenure. It guarantees that in the event of your premature death, your beneficiaries will receive the death benefit.
Single premium term insurance benefits:
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You only have to pay the premium once and secure the future of your family without the stress of regular payments.
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It is good if you have a lumpsum amount on hand so you can invest it wisely for your family’s future.
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It is an excellent policy plan for those who do not have a steady source of income.
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With ROP, you can receive the maturity benefit, which is essentially the premium amount you paid upfront that now serves as a savings plan in tough times.
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You can use the premiums that you would otherwise have to pay regularly to deal with difficult financial situations through the course of your lifetime.
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Level term plan –
This is a stress-free term plan where you decide on the sum assured and policy tenure, and the insurance provider offers a reasonable rate of premium. Everything is straightforward so you need not worry about any increase or decrease in death benefit. You can plan your finances accordingly with no surprises.
Level term insurance benefits –
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The sum assured neither increases nor decreases, so you can be assured that your beneficiaries will receive a lump sum amount as promised regardless of extenuating circumstances.
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The premiums you pay are tax deductible.
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You have the option to add ROP riders, so you receive the lump sum maturity benefit to help out during tough financial setbacks.
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The rate of premium is very affordable.
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Add-ons –
You can also add riders to your term plan for death caused by critical illness, accidents, and other circumstances that may befall you. These add-ons help increase the sum assured in special circumstances.
Conclusion
Term insurance benefits differ because one size does not fit all. You have the liberty to choose the type of term plan that best suits the needs and lifestyle of your family. The premiums are affordable, so they do not stress your financial planning, and the benefits help reduce your liabilities one way or another so you are always prepared for difficult times.
