Term life insurance is one of the most popular life insurance products available in India. Nowadays, almost every major life insurance company offers term insurance products in response to the constantly increasing demand for the product.
It works as a cost-efficient alternative to a whole life policy that provides you adequate coverage at a significantly lower cost. However, you may wonder whether the competitive price can justify the relevance of a term plan or not.
As there is no scope of financial appreciation in a term plan, a person with no dependents may find a term plan worthless. So, how do you determine if a term plan is still relevant for you or not? Let’s find out through this article this very minute.
What is a Term Plan and How Does it Work?
If you’re looking to safeguard your family’s future financially in your absence, then a term insurance plan is a must-have investment for you. It’s not only available at a very budget-friendly price, but also extremely simple to understand.
The plan covers your family for a defined period of 10-30 years, which depends on the term length you choose based on the time required by you to fulfil a particular financial responsibility. For example, you can choose a term until your mortgage is paid off or your children are grown into adults.
You can use an online life insurance calculator to get a recommendation on a coverage amount and term length that may best fit your financial situation. If you die within the term length, a payout called a death benefit would be paid to your beneficiary or beneficiaries.
The death benefit provides coverage for expenses that come with death, such as funeral arrangements and other end-of-life expenses, along with day-to-day bills. Keep in mind that no benefit is given if you survive throughout the policy tenure under a term insurance plan.
Who Requires a Term Plan?
If you have someone that relies on you financially (a family with children, for example), then life insurance makes sense. Conversely, if you don’t have anyone financially relying on you, then term insurance isn’t necessarily worth it but can still pay for your funeral expenses.
When you pass away, this money can be used to cover the costs of your funeral and final expenses. It will leave a legacy for your loved ones without adding further financial stress. Here’s how the death benefit offered by a term plan can help your dependents:
- Helps your family pay off your remaining debts and mortgages
- Replaces lost income and helps with day-to-day expenses
- Provides for the betterment of your children
- Pays for the expenses related to your funeral or burial
- Funds for the education of your child
The best thing about term insurance plans is that the death benefit received by your beneficiary is completely free from taxes. Therefore, with a very nominal investment, you can ensure a complete safeguard of your family’s future.
What Are the Alternates of Term Insurance?
One of the best alternatives to a term plan is a permanent life insurance policy. With a term policy, you’re just buying coverage for a set amount of time. However, with a permanent policy, you’re covering yourself in perpetuity.
You can’t predict when you’re going to die, and it’s possible that something could happen to leave your children or spouse with a financial burden. Term life insurance can help to cover the cost of any outstanding debt you leave behind.
On the other hand, if you get a whole life insurance policy, you get lifetime coverage. If you take out loans from the cash value built up in your life insurance policy, you can pay college costs or for your children or fund your retirement.
If you have an immediate requirement of funds, borrowing against a life insurance policy is a viable option. However, you should know that borrowing against a life insurance cash value reduces its death benefit and increases the chance of lapsing.
Term life insurance is less expensive than whole life, and it’s specifically designed to pay out only if the insured person dies within a certain period. Compared to a whole life policy, a term plan is simpler to manage as well.
We have compiled a list of the term insurance plans available in India out of which you can choose the best term insurance plan suitable for your needs.
Best Term Plans Available in India
1. Canara HSBC Oriental Bank Of Commerce – iSelect Star Term Plan
The Canara HSBC Oriental Bank Of Commerce’s iSelect Star Term Plan is a comprehensive term policy designed for people who want reliable financial protection and also want options such as whole life coverage and covering spouse in the same policy.
2. Aviva Life Shield Advantage Plan
The Aviva Life Shield Advantage Plan is a financial protection term plan that will pay out your beneficiaries upon your death, or if you’re lucky and live to the end of the term, you’ll be able to cash out what you invested.
3. Exide Life Smart Term Plan
The Exide Life Smart plan provides a financial safeguard to your family against various kinds of unfortunate events. It offers you higher insurance coverage as compared to other policies available in the market, and it’s non-linked and non-participating.
When it comes to insurance policies, a term plan is certainly one of the most popular options available in the market. With a very nominal investment, you can obtain good coverage for your family’s betterment in your absence.
Talking about its relevance in today’s time, as long as you have dependents relying on you financially, you should have a term plan. There’s no doubt that it is beneficial but may not fit the bill for everyone. There are several term insurance plans available as per your requirements.