Updated on October 4, 2023
Term insurance is one of the most common forms of insurance in India and the cheapest form too. This form of insurance is explained in detail here.
What is Term Insurance?
Term insurance is a type of life insurance policy that provides coverage for a specified period or term. Unlike traditional life insurance policies, which may have an investment component, term insurance is purely focused on providing financial protection to the policyholder’s beneficiaries in case of the insured person’s demise during the policy term. Selecting the right term insurance policy involves assessing one’s financial goals, income, and family’s needs. Policyholders should carefully consider factors such as the sum assured, policy term, and riders (additional coverage options) to tailor the policy to their requirements.
What are the top features of term insurance in India?
The top features of term insurance are mentioned below.
Affordability – Term insurance is known for its affordability. It offers a high coverage amount (sum assured) at relatively low premiums, making it accessible to a wide range of individuals, including those with budget constraints.
Pure Protection – Term insurance is often referred to as “pure protection” because it doesn’t have a cash value or savings component. It’s designed solely to provide a death benefit to the nominee or beneficiary if the insured person passes away during the policy term.
Customizable Policy Terms – Term insurance policies in India offer a range of policy terms, typically ranging from 10 years to 40 years or more. Policyholders can choose a term that aligns with their financial goals and responsibilities, such as until retirement or until the education of their children is complete.
High Sum Assured – Term insurance allows individuals to opt for a high sum assured, ensuring that their loved ones receive a substantial payout in the event of their untimely demise. This payout can help cover various financial needs, including loan repayments, daily expenses, and long-term goals.
Income Tax Benefits – Premiums paid for term insurance policies are eligible for tax deductions under Section 80C of the Income Tax Act. Additionally, the death benefit received by the nominee is tax-free under Section 10(10D).
Why is term insurance important?
Term insurance is of great significance for various reasons. It provides essential financial security for families, ensuring they can maintain their living standards in the absence of the primary earner. Additionally, term insurance safeguards against outstanding loans, supports children’s education, and acts as an income replacement tool. Its affordability makes it accessible to a wide range of individuals, making it a practical choice for securing one’s family and financial future.