As we grow through life, planning accordingly for our life stage is quite important. Ensuring that you and your loved ones are financially secure throughout your life and prepared for any expenditure you know you will have to take care of is quite important. Further, you have to be ready for uncertainties that might emerge and cause financial stress.
An insurance policy is often an essential feature of such preparedness. A term plan is a kind of life insurance policy that is one of the best ways to protect your future and of your loved ones.
What is a Term Insurance Plan?
A term insurance plan is a pure insurance coverage plan. With a term plan, you will be covered for the pre-decided tenure of the plan. It was designed to help individuals deal with the financial risks and income loss to a family due to the death of the breadwinner. Insurance companies have made it easy for individuals who wish to buy a term plan by offering online term plans. Companies like TATA AIA have provided different features to help individuals to buy term plan. For instance, if you buy the TATA AIA term plan, you can use their insurance calculator to purchase the best plan for yourself.
6 Differences Between Term Plans and Other Insurance Plans
- Insurance requirement
There are several variants of insurance plans available in the country. Each of these insurance plans is tailored to meet a particular need of the policyholder. For example, health insurance helps the policyholder handle medical expenses, and endowment policies help the policyholder save funds.
Compared to these plans, pure term insurance plans help cover the probable income loss, disruption of a household’s financial plan or debt fulfilment of the family. While insurance plans like health insurance and endowment plans may help in certain aspects like medical expenses and wealth creation, they won’t help maintain financial stability.
- Insurance tenure
Insurance plans like endowment and payback plans begin after retirement to provide the policyholder with income. The insurance benefit of these plans expires with the plan’s maturity. Whole life plans and term plans, however, can be purchased with a tenure up to the age of 100 years.
However, the premiums for whole life plans are higher than that for term plans. Term insurance plans offer the same amount of benefit even in the policyholder’s later years, helping them secure their children’s financial future.
- Insurance plan premium
Term plans are among the most affordable insurance plans available in the market. Based on the maturity benefits, payout options and bonus, the premiums on other insurance plans can be a bit expensive compared to simple term insurance plans. Term insurance plans, however, are quite cost-effective, making them ideal choices for young individuals.
- Plan flexibility
Term insurance plans are quite simple to purchase. You will only have to fill out a few online forms and undergo a medical test. Certain term insurance plans also offer the ability to increase coverage in the future. It can be quite helpful for individuals whose insurance requirements change throughout their lives. Along with this, surrendering a term policy is quite easy. Policyholders can halt the payments, and their policy will lapse.
- Insurance coverage
The coverage offered by term insurance plans is one of the highest amongst all the insurance plans available. Term insurance plans help in protecting a household’s financial stability. With a term insurance plan, you can be at peace knowing that your family will be financially secured if something happens to you.
- Tax benefits
All insurance plans offer tax benefits as per Section 80C of the Income Tax Act. The tax benefits are up to Rs. 1.5 lakhs as deduction from taxable income. Term insurance plans offer death benefits at a minimal cost, and they will still leave a deductible value of more than 90% as per Section 80C. The same can be used for other products like home loan repayments, pension plans, etc.
Summing up, a life insurance policy has become an important purchase these days. A proper financial plan for your future well-being must include different insurance plans. However, including a term insurance plan should be your priority. When you buy a term plan, you will be at peace knowing your family’s financial future is secure. They have been designed to offer your family and loved ones decent financial support in the event something happens to you. While all insurance products are mostly similar, term insurance plans have certain differences compared to the other plans.