The insurance is not restricted to the age-old nowadays. The expansion of the insurance sector in the past decade has brought in several companies, catering options with a wide range of plan features. The best term plan includes a life cover, and a guaranteed financial security to your family with a regular flow of income.
What Exactly is Term Insurance in India?
A term insurance plan is also referred as a pure life insurance plan. It covers the insured for a certain period in return for a specific amount of premium paid by them. The best term plan guarantees payment of the stated death benefit to the nominee if the policyholder passes away during the term period specified in the insurance policy.
The amount received from the death benefit can be used by your family members to repay ant financial liabilities taken by you. They can also accomplish life aspirations without financial interruptions.
Benefits of Buying Term Plan Insurance
You can avail several benefits of investing in a term insurance plan. Here are the most important ones.
- The major advantage of buying a term insurance plan is that you can get higher returns by paying significantly lower premiums.
- The entire premium paid towards the best term plan covers the risk of unexpected losses.
- The policyholder can also choose the frequency and mode of payment from the various options provided by the insurance company. They can either pay whole premium as a lump sum or at regular intervals throughout the policy term or for a limited period.
- The premium paid towards the term insurance plans are tax exempted under Section 80C of the Income Tax Act, 1961. Also, the death benefit received by the nominee is tax exempt as per Section 10(10D).
- The policyholder can choose whether the chosen sum assured is paid to the nominee in form of lump sum or equal monthly income payments.
How to Find the Best Term Plan For You
When calculating your term insurance plan coverage, you should keep in mind that it must be 10 to 20 times more than your current annual income. Many people tend to consider the premium amount when deciding on the coverage of term plan.
Here are the suggested ways to find the best term plan for you.
Check Claim Settlement Ratio (CSR)
The claim settlement ratio (CSR) reflects the percentage of claims paid out of the total claims field in the year. The higher the claim settlement ratio, the easier it will be for your family to claim insurance when you are no more and continue to live their lives comfortably.
The objective of a term plan insurance is to secure your family’s future. The higher the claim settlement ratio, the better are the chances of making sure that your family’s future is secured. It is also important to check the total number of claims that were settled by the insurer.
Check the Solvency Ratio
You can know the insurer’s financial capability of settling your claim if the need arises by the solvency ratio. IRDAI (Insurance Regulatory and Development Authority of India) mandates that every term insurer must maintain a solvency ratio of at least 1.5.
In case of a natural disaster, you will receive a large number of claims in a short period. In such cases, the solvency ratio becomes vital. You can settle high volume of claims quickly. The financial security of your loved ones will depend on the financial stability of your policy insurer.
Go Through All Terms and Conditions
Before buying any of term plans, you should make sure to read the terms and conditions written in the term insurance policy. It will help you know the information on special cases where the death benefit cover is not provided, like when you die due to self-harm.
Going through terms and conditions will help you to understand the inclusions and exclusions of the term insurance plan you are considering as a long term investment.
Check the Premium Amount
It is always essential to compare the premium rates of all available term insurance plans and the best term plan that offers a high coverage amount at affordable premium rate.
The coverage amount available against a specific premium also depends on your age and health. You can easily compare various term plans and premium rates online.
Conclusion
If you are your family’s sole breadwinner, getting a term plan insurance assures you the financial security of your loved ones even in your absence. It is essential for you to understand what is term life insurance in India and how it can be beneficial for you.
The best term plan provides sufficient coverage at reasonable prices. It is important to first analyse your requirements with respect to your age, financial status, and future needs of your dependents.
A condition that applies to the tax benefits described above: the Section 80C deduction (a single ₹1,50,000 ceiling shared across EPF, PPF, ELSS, home-loan principal and insurance premiums), and exemptions claimed under Section 10(10D), which carry their own conditions in the Act can be claimed only if you file under the old tax regime. They are not available under the new regime, which is now the default — so check which regime you are on before counting on these benefits. Tax rules change at Budget; confirm the current position for your assessment year before acting on it.
