Financial planning in the country largely remains bereft of insurance cover. Indian families seldom consider the importance or necessity of having adequate insurance cover. Terms like life insurance and term insurance are alien to a large part of the population. These are not subjective inferences but backed by credible data. According to an analysis of the available data by IndiaSpend, at least 75% of the Indian population is not covered by any form of life insurance. Another important data point says that individuals with insurance, on an average, are assured of only 8% of what is required to financially secure a family.
The low penetration of life insurance signals towards a lack of financial awareness. Most people fail to gauge the importance of having a financial buffer such as a term insurance plan. Term insurance is a form of life insurance that provides coverage for a specific period of time. If the insured dies within the specified time, the insurer pays the sum assured to the nominee. In case the insured survives the tenure, the term insurance policy ceases to exist. Term insurance does not have an investment component, and hence, no maturity benefits are paid to the insured. Here are 10 reasons that make term insurance must-have protection.
- Minimal Cost: Being a developing country, many families cannot afford to put aside a considerable sum regularly for life insurance. It could be detrimental to their material well-being. Structurally, term insurance is one of the most basic financial products. There are no savings or investment component in term insurance, which makes it significantly cheaper than other life insurance products.
2. Financial Security: Indians are underinsured, which means that even people with insurance do not have the required cover. The sum assured is a significant factor in determining the amount of premium you will have to pay for the policy. Term insurance has made financial security affordable as you are assured of a substantial cover at minimal costs. With term insurance, you can live a secure life without worrying about the financial security of your family in your absence.
3. Comprehensive Coverage: Even though term insurance is a form of life insurance, it can be tweaked to perform functions of health insurance. You can modify term insurance plans with riders by paying an additional premium. Cover for critical illness and accidental death and disability can be added to a term insurance plan.
4. Fixed Premium: Term insurance is a basic product with the sole function of securing the financial future of the insured. The sum assured, or the premium is not indexed to the market, which makes it a very stable insurance product. Once an insurance company accepts your request, the premiums remain the same throughout the policy term.
5. Increased Life Cover: The needs of a family increase with an improvement in lifestyle. It is pertinent to hike the insurance cover in consonance with the increase in financial needs. Some term insurance policies offer insurance cover linked to life stages. The sum assured automatically increases at a certain rate as per the age of the insured.
6. Flexibility: The needs of every family is different. Some need regular income while some seek a lump-sum amount. Term insurance plans have flexible payout options. You can opt for a lump-sum payment or choose to receive a part of the sum assured as lump-sum and the balance in equal instalments. The premiums can also be paid on a monthly or annual basis.
7. Takes Care of Liabilities: Buying a house or a car through bank finance is common practice. But in the race to improve their material condition, many people inadvertently increase their liabilities. In the event of an unfortunate incident, liabilities can become an albatross around your family’s neck. Term insurance plans with short tenures like 10 years can be taken to secure your family against liabilities.
8. Income Tax Benefits: Buying a term insurance plan comes with a host of income tax benefits. You can claim a tax deduction of up to Rs 1.5 lakhs per year under Section 80C of the Income Tax Act, 1961 for the premiums paid for term insurance. The sum assured paid to the nominee is tax-exempt under Section 10 (10D) of the income-tax law.
9. Spouse Cover: The financial security of your spouse is as important as yours. Having an additional cover can be critical in times of need. Canara HSBC OBC Life Insurance provide an option to cover both husband and wife under a single policy with an additional premium under its term insurance plan.
10. Easy to Buy: The rising internet penetration has nudged insurance companies to launch a number of financial products that can be bought online. Being a simple product, almost all companies offer the option to purchase term insurance online. Buying it online is cheaper and saves a lot of time.
The importance of term insurance cannot be overstated. Canara HSBC OBC Life Insurance’s iSelect Term Plan, safeguards your family’s financial interests along with providing value-added benefits like Long-term financial security, which gives you life cover up to the age of 80; a Customizable Cover, which gives you the option to increase your life cover by 25% every 5 years; a Family’s Monthly Expenditure option, wherein you can receive the death benefit as regular monthly income and much more. With this, you can live a happy and stress-free life with the guarantee that your family will live a financially secure life even in your absence.
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