What is Term Insurance?
Term insurance work under section 10D and 80C of the income tax act 1961, and one also get some tax relaxation in a term insurance policy under these sections of the income tax act. Term insurance is a simple form of life insurance.
Term insurance plans are the cheapest insurance plan. It is a life cover for a defined period. We only get death benefits in pure life insurance, not any maturity benefit.
Term insurance: A protective insurance
So we can say term insurance is a protective insurance. In case of the policyholder’s unfortunate death, the owner’s nominee will get the sum assured in term insurance. Moreover, term insurance can be a source of regular savings if the policyholder’s family opts for monthly payments.
Term insurance plan – At an early age
Buying a term insurance plan at an early age can be more beneficial because as one gets older, the premium of term insurance gets higher, so the sooner you get term insurance, the better it is.
And term insurance also depends on other factors like smoking and existing illness and the payment method like yearly, quarterly or single payment.
Suppose you take term insurance for 20 years. You can get it by a single payment, or you can opt for regular expenses like yearly, monthly, and quarterly as per your comfort.
How much sum assured can you get?
Then if you talk about the sum assured, that is how much sum assured you can get. According to the rule of RBI, Insurances Company can provide a sum assured of a maximum of upto 20 times of one’s income.
Suppose your annual income is 5 Lakhs, then you can get the total sum assured up to 1 Crore; you can get the complete coverage of INR 1 Crore.
Then if we talk about term insurance policy term that should be-
- Minimum of 5 years and up to whole life is also available while some company offer for life but maximum company offer till age 65.
- You can also get a collective term plan in term life insurance; if both husband and wife want to take insurance together still in term insurance, you can cover both of you by paying a single premium.
- Unfortunately, one dies, then the other will get money.
- You can also choose an accidental cover, permanent disability cover, etc.
Why term insurance?
All your loans and liabilities will be covered if you take one term insurance plan.
Otherwise, you have to take different insurance for each thing. You can take insurance for property or any loan and liabilities; taking car insurance separately is also compulsory, but all loans and penalties will be covered by term insurance if the child has to have an education in the future or marriage.
Term insurance can also be beneficial if you want a regular monthly income.
Get maximum coverage in low premium –
You get maximum coverage in low premium, which is a speciality of term life insurance policy. In a pure insurance plan, we don’t invest. Still, term life insurance can also be considered as an investment plan.
If your partner is not earning monthly income in the future for support, so all those become your future liabilities, you should also take insurance cover to cover them. And because term insurance is the cheapest, that’s why people want to take it.