What is Term Insurance?
Term insurance is a type of life insurance that provides coverage for a specific period of time or years, i.e., a term. This type of life insurance provides a financial benefit to the nominee in case of the unfortunate demise of the insured during the policy term. A term insurance policy provides high life cover@ at lower premiums. For e.g.: Premium for ₹ 1 Crore Term Insurance cover could be as low as ₹ 432* p.m. These fixed premiums can be paid at once or at regular intervals for the entire policy term or for a limited period. Premium amount varies basis the type of the premium payment method opted by the buyer.
Who Should Buy a Term Plan?
Anyone with financial dependents should buy a Term Insurance Policy. This includes married couples, parents, entrepreneurs and self-employed, SIP investors, young professionals with dependent parents, and in some cases, even retirees.
Premiums paid under the policy are allowed as a deduction subject to conditions u/s 80C of the Income Tax Act, 1961. The proceeds received under the policy are exempt subject to conditions prescribed under 10(10D) of the Income Tax Act, 1961. Term Insurance also has among the lowest premiums compared to the different types of insurance policies.
Hence, individuals who derive any of the three significant benefits associated with term insurance should consider buying such policies. The three significant benefits are – life protection, tax-saving and affordable premiums.