Term Insurance – Here’s Everything You Need To Know About How It Can Secure Your Future

Like the name suggests, term insurance is a form of life cover for a specific “term” or time. It is also referred to as a “pure insurance” because it is not an investment but rather a coverage. Meaning, its sole purpose is to provide financial protection to your family, in case of your demise during the designated period of your policy. It is the most cost-effective life insurance policy, largely because you are required to pay a very affordable premium for a substantial life cover. Because of its low premium cost, it is usually the first ever insurance policy that people buy.

BENEFITS OF A TERM INSURANCE PLAN

There are several reasons why you should buy term insurance. Here’s a quick look at some of them:

Financial security for dependents: In the unfortunate event of your death, your family will have to cope with financial losses as well. A term insurance policy will reduce the burden of financial liabilities in your absence, while covering daily expenses and long-term financial needs. Aditya Birla Sun Life Insurance DigiShield Plan is a comprehensive term insurance plan that provides you with ten plan options to choose from, based on your various needs—all so that you can financially protect your loved ones from the uncertainties of life.

Ease of Use: Being a pure insurance, term policies have no investment component. The beneficiary/ nominee receives the cover amount or sum assured after the death of the life insured, during the policy term.

Higher coverage for lower premiums: Extremely pocket-friendly you can get insured for a large amount by paying lower premiums. For instance, Aditya Birla Sun Life Insurance DigiShield Plan provides a life cover of Rs. 1 Crore at just Rs. 542 per month¹ to a 21-year-old female, for a term of 25 years.

Long life cover: While you can buy your term insurance policy as soon as you turn 18, the good news is that it offers a substantially longer coverage. The term insurance policy by Aditya Birla Sun Life Insurance DigiShield Plan provides a life insurance cover till the age of 100 years.

Flexible pay-out options: To help your family manage expenses in your absence, you can choose how they will receive the assured sum. The pay-out can be a lump sum amount or in the form of a monthly/annual income.

Liability coverage: If you’ve selected your life cover adequately and wisely, your term insurance policy will bolster your family to pay off obligations like home loans and car loans with the claim money received.

Tax benefits: While term insurance premiums qualify for a deduction up to Rs 1.5 Lakhs under Section 80C, the claim amount is exempted from tax under Section 10 (10D).

TERM INSURANCE VS WHOLE LIFE INSURANCE

While both offer life coverage and secure your family in the event of your demise, the biggest differences between the two are in coverage length and cash value. While term insurance is simple and for a stipulated number of years, it has no investment component. Whole life insurance, on the other hand, covers you for as long as you live and offers returns to the money you’ve invested. That’s why the premium rates of whole life insurance are much higher, making it expensive and unaffordable for some. However, term Insurance is extremely affordable and allows you to secure your family for a nominal sum.

WHAT TO CONSIDER WHILE BUYING TERM INSURANCE

There are several things to look out for before buying a term insurance policy. These include:

Coverage amount: Identify the maximum coverage that you can get at an affordable cost. Experts suggest that your coverage should be 15 to 20 times more than your annual income.

Premium payment frequency: If you are a salaried individual, choose regular time slots, which can be monthly, quarterly, or annual. If you’re self-employed and your cash flow is irregular, you can choose a single pay option, where you can pay a lump sum or choose a limited pay option where you can pay your premium for a limited period (5 to 20 years) and get covered for the entire policy term.

Choosing an insurance company: Look up the company’s claim settlement ratio, which indicates the comparison between claims filed and claims settled. The higher and more consistent the claim settlement ratio, the better. Aditya Birla Sun Life Insurance’s claim settlement ratio for FY 20-21 is 98.04%, indicating that it has a legacy of trust.

Look out for term insurance riders: These are value additions to your basic plan, which you need to purchase as an add on. For instance, if you choose a critical illness rider, then you are eligible for a payout in case you are diagnosed with the illness specified by your insurer. In a regular term plan, the payout is given only to your nominee after your demise. The Aditya Birla Sun Life Insurance DigiShield Plan offers six riders that you can add to the policy to enhance your insurance coverage.

CONCLUSION

The past two years have taught us that life is unpredictable. But your family’s financial security need not be. You can safeguard them by insuring yourself. Thanks to term insurance policies which offer a substantial life cover for a nominal premium, you can protect your family even if you don’t have a high income. It is one of the most pocket-friendly ways of protecting the financial future of your loved ones in your absence.

To view term insurance plans and buy them online, click here

¹ABSLI DigiShield Plan (UIN: 109N128V01) scenario: Female, non smoker, Age: 21 years, level Term Insurance, Premium paying Term: regular pay, policy term: 25 years, Pay frequency: Annual Premium of ₹6500/12 months = ₹542/month

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