Benefits of Term Insurance

Benefits of Term Insurance

Term life insurance is the simplest form of life insurance that offers financial security to policyholder’s family in case of the untimely demise of him or her within the tenure of the policy. However, while purchasing a term insurance one has to remember that it is a pure protection plan with no maturity benefits. Although, there are plenty of other benefits of term insurance which makes it an inevitable choice for every individual.

High death benefit at low premiums:

One of the primary benefits of term insurance is high sum assured or death benefit amount against low premiums. However, term insurance is not necessarily the least expensive when it comes to renewing the policy after the entire policy tenure gets over as the premiums of term insurance policy will be costlier during renewal as compared to the premiums charged during the policy issued. This is because the policyholder’s age will not be the same at the time of renewing the term insurance policy.

Flexible pay-out options providing financial security to the loved ones:

Term insurance offers various pay-out options such as annually, monthly or partially. This helps the insured person to opt for a pay-out as per his or her convenience, keeping in mind the liabilities. For instance, if the beneficiary requires monthly income, then a monthly pay-out option is ideal to fulfil their daily needs.

Ease of paying premiums periodically:

In term life insurance, one can pay the premiums at different frequencies like yearly, monthly, quarterly or half-yearly. Under single premium plans, one can pay the entire premium at one go and get rid of the hassle of missed payments and getting policy lapse. However, yearly premiums are less expensive than monthly premiums. And, it depends on the policyholder to choose the premium payment option based on his or her convenience.

Tax benefit:

One of the most important term insurance benefits is that its premiums are eligible for tax benefit up to Rs 1.5 lakhs under Section 80C of the Income Tax Act (ITA), 1961. This benefit help policyholder in saving tax. Moreover, the death benefit amount which the policy nominee receives upon the untimely demise of the insured person is completely exempted from tax under Section 10(10D) of Income Tax Act.