|
Talk of Life Insurance and the first thing that comes to an individual's mind is making burdensome premium payments over several years to save tax. Life insurance has suffered from an 'image problem' of this nature mainly because it has often not been positioned or perceived in the right manner. There are many reasons to buy a Life Insurance even if you are not supporting a family. Why life insurance Simply put, the purpose of taking Life Insurance is to provide life cover to the policyholder so that the family can get by financially in his absence. Broadly, there are two ways the individual can take insurance > by taking pure life cover > by taking life cover with a savings component built-in Why pure life cover is better Term Plans provide life cover with no savings / profits component. They are basic in nature which is a plus point for individuals who are looking for just a life cover without the savings. This makes term plans the most affordable form of life insurance as premiums are cheaper as compared to other life insurance plans. A fixed sum of money - the sum assured - is paid to the beneficiaries if the policyholder expires over the policy term. If the policyholder survives, there is no pay out. Key features that make term plans indispensable: 1. Larger life cover Since term plans are more affordable it is possible for an individual to get a higher life cover for the same premium as an endowment plan. For e.g. a 25-year old can get a term plan with a cover of Rs 10 million for a 30-year term by paying an annual premium of Rs 6,000 - 7,000 A comparable cover on an endowment plan will come with a much higher premium of Rs 2 - 3 lakhs annually. The Rs 10 million,endowment plan will probably be unaffordable for most 25-year olds. However, they can certainly afford the term insurance plan. 2. Riders The policyholder can attach riders to the term plan. So if let's say there is a critical illness rider, he is entitled to receive the sum assured on being diagnosed with the critical illness. This is in addition to the death benefit of an equal amount on death over the term of the policy. Likewise there are other riders like disability cover, loss of employment cover, waiver of premium cover, among others. The policyholder should select riders based on needs since they can add considerable value to the life cover. 3. Enhanced cover A feature offered by term plans of certain insurance companies is the flexibility to enhance the life cover during critical stages of the policyholder's life. For instance, an insurance company may allow policyholders to enhance the life cover by 50% at the time of marriage and by 25% at the time of turning a parent. This allows policyholders to start with a modest cover and enhance cover as responsibilities increase as also their ability to pay higher premium. 4. Innovative features Across the gamut of life insurance plans, one finds that the maximum innovation has visited term plans. For one, insurance companies have been quick and proactive in cutting premium rates even offering extra discounts to certain categories like non-smokers, for instance. Buying term plan has been made easier thanks to the internet. It is now possible for a healthy individual, as defined by the insurer, to buy a term plan over the internet without taking a medical test. Term plans are extremely popular in developed markets because individuals see the need for securing their dependents against life's uncertainties and realize that term insurance is the best and cheapest way to achieve the objective. With insurance having evolved over the years in India and awareness levels rising considerably, Indians should also begin to appreciate the need for term plans in their insurance portfolio. Benefits of term insurance plans: a) Large Life Insurance cover for a small premium amount b) Tax savings benefits under 80C and 10(10D) of the Income Tax Act 1961 c) Simplest life insurance product, easy to understand & purchase online d) Available with multiple variants and extra benefits like accidental cover, single premium, limited period, family income option etc.
|
