Masha and Subhan, colleagues at an IT firm, had just settled down for lunch in the bustling office canteen. The aroma of freshly cooked food wafted through the air as they dug into their delectable afternoon veg thali. Between bites of aromatic curry and fragrant rice, their conversation drifted towards a topic that many of us often overlook – term plans and their benefits.
Masha, a financial planner, started a discussion, “Subhan, heard about the term plan?”
Subhan replied in a puzzled manner, “Well, I have not, what is it?”
Taking a sip of buttermilk, Masha began explaining, “A term policy is a kind of life insurance policy that offers cover for a particular duration or term. If the policyholder passes away during the term, the insurance company pays a predetermined sum assured to the nominee. It is a crucial financial product that can offer numerous benefits.”
Curious, Subhan leaned in, prompting Masha to elaborate further on the benefits of term plans –
Affordable premiums
Term plans are known for their affordability. The premiums for term insurance policies are relatively low compared to other types of insurance policies, making them accessible to a wider range of individuals, including those on a tight budget.
Tax benefits
Premiums paid for term insurance policies are eligible for tax deductions under Section 80C. This tax benefit not only reduces your taxable income but also encourages responsible financial planning.
Financial security
Term plans offer the financial net for your dependents’ financial future by providing an assured payout to them on the occasion of your unanticipated death. This allows your dependents to maintain their living standard, and meet their distinct financial expenses and obligations even after you are not there to financially support them.
High coverage amount
Term plans allow you to obtain a substantial coverage amount at a relatively low premium cost. This means that you can secure a sizeable financial safety net for your family without straining your finances.
Flexible payout options
Term plans offer flexibility in choosing how the sum assured is paid out to your nominees. You can opt for a lump-sum amount, which can be beneficial for immediate financial needs, or staggered payouts that provide a regular income stream to your family over a specified period.
Debt repayment
In the unfortunate event of your demise, term plans can help in settling outstanding loans such as a mortgage, personal loans, or credit card debt. This helps prevent your family members from facing the strains of financial expenses and liabilities.
Customisation
Term policy can be personalised to match your particular requirements. You can choose the policy term, coverage amount, and additional features based on your individual financial goals and family’s requirements.
Protecting goals
Term insurance ensures that your family’s long-term financial goals, such as funding education or marriage expenses for your children, remain unaffected by your absence. It secures their aspirations and dreams.
Premium payment options
Term insurance policies offer flexibility in premium payment frequencies. You can choose to pay premiums annually, semi-annually, quarterly, or even monthly, allowing you to manage your cash flow effectively.
Riders
Term plans offer the option to add riders, such as accidental death or critical illness riders, to enhance the coverage. These riders provide additional financial protection in specific circumstances, giving you comprehensive coverage.
No maturity benefit
Term plans do not provide any maturity benefit if you survive the policy term. While this may seem like a drawback, it keeps the premiums low, making term insurance an economical choice for pure life coverage.
Quick claim settlement
Insurance companies often prioritise a quick claim settlement process for term plans. This ensures that your nominees receive the sum assured promptly, helping them meet immediate financial needs without unnecessary delays.
Mental peace
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