Term Insurance May be More Affordable than You Realise

Only 34% of Indians with a life insurance policy have a term plan. Meanwhile, only 74% aware of term plans, and most of them think that it is only meant for those who serve as the breadwinner of the family. The reality, however, is that term insurance is one of the most basic and simplest forms of life insurance that offers complete financial protection to your dependents if you meet with any unfortunate event in the future.

Moreover, term insurance is cheaper than most forms of life insurance available in the market since it is a pure protection plan. It is designed to provide death benefits to your loved ones to help them meet their financial needs, such as your children’s education, loan repayment and maintenance of their own standard of living.

Let us take a look at what makes a term insurance plan so cheap and affordable. From having no investment component to benefiting from online purchase options, several factors work together to keep the premium low while still offering high coverage. Understanding these cost-saving features can help you make an informed decision and secure adequate protection without straining your budget.

• Zero Fund Management Charges: A term plan has no investment component. It is a pure insurance product. Unlike market-linked policies, which require regular monitoring and charge additional fund management fees,  term insurance has no portfolio, money management or administrative fees or charges. Since it is not an instrument of wealth creation, insurers are able to offer competitive premium rates.

• Limited by Term: Many believe that, owing to the low premiums, term insurance plans do not provide comprehensive coverage and only offer a low sum assured. However, this could not be further from the truth. A term insurance policy has a high sum assured, even at low premiums. This is made possible since your term plan comes with a specific term attached, as opposed to a whole life insurance policy, which is taken for a lifetime.
• Buy Online: Earlier, insurance was sold through agents. However, today, you can easily purchase a term insurance plan online. These are 30 to 40% less expensive than their offline counterparts, owing to little paperwork, elimination of intermediaries or agents and logistics. All this reduces the service and distribution charges of the insurance company considerably. This benefit is, in turn, passed on to customers to help them avail of a policy online at affordable rates with quick processing and hassle-free purchase prices.
• Compare Online: Not only does an insurance company offer you a premium calculator to help you determine the amount payable if you choose a term plan, but you can also compare different plan options to arrive at a policy with benefits that suit your requirements. These tools make it easier to evaluate benefits, features, and costs to arrive at one that suits your budget.
• Age Factor: It is advisable to buy term insurance as soon as you start earning and are responsible enough to manage your own finances. This is because your age works to your advantage. Young, healthy individuals are likely to get a policy with a much higher sum assured, as compared to someone 10 years older, at a much more reasonable rate. The earlier you purchase it, the longer you and your loved ones stay financially protected.
• Tax Benefits: A term insurance plan helps you save tax, thereby further lowering your financial outgo. As per Section 80C, you can avail of a tax deduction of up to ₹. 1.5 lakhs on the premiums you pay towards the policy. Apart from this, the death benefit paid out to your family to help them meet their expenses in the future is also tax-free under Section 10(10D). Although this should not be the only reason to purchase a policy. However, it is incentive enough.

Understanding the Importance of Choosing the Right Sum Assured

Choosing the right sum assured is crucial when buying a term insurance plan. This is the amount your nominee will receive if something happens to you during the policy term. While it might be tempting to go for the cheapest policy with a low sum assured, that could leave your family financially vulnerable in tough times.

Consider these key points when deciding your sum assured:

• Aim for 10 to 15 times your annual income: This generally covers immediate expenses like loans, children’s education, daily living costs, and long-term goals.

• Account for existing debts and future financial obligations: Factor in any outstanding loans or planned expenses, such as weddings or higher education.

• Ensure your family’s lifestyle is maintained: The coverage should help your dependents maintain their current standard of living without financial stress.

• Understand the premium impact: Higher coverage increases your premium, but usually only by a small margin, worth the extra protection.

• Review coverage regularly: Update your sum assured after major life events like marriage, the birth of a child, or buying a home to keep your protection relevant.

A well-chosen sum assured offers peace of mind and financial security, ensuring your loved ones are cared for no matter what.

Customise Your Coverage with Riders

Term insurance plans offer optional riders that let you enhance your coverage based on your specific needs. These add-ons come at a small extra cost but provide greater financial security in different situations.

Some common riders include:

• Accidental Death Benefit Rider: Offers an additional payout if the policyholder dies due to an accident.

• Critical Illness Rider: Pays a lump sum if you’re diagnosed with a listed critical illness like cancer or heart disease.

• Waiver of Premium Rider: Waives all future premiums if you’re unable to work due to disability or illness, keeping your policy active.

• Income Benefit Rider: Provides monthly income to your family for a fixed period in addition to the lump sum.

Adding relevant riders ensures your term plan works harder to protect your family during life’s unexpected turns.

Conclusion

While aiming for the cheapest insurance should not be the goal, it is worth your while to give a thought to a term policy that you can purchase at a reasonable price and ensure the financial security of those dependent on you. The iSelect Smart360 Term Plan by  Canara HSBC Life Insurance offers you comprehensive coverage at affordable premium rates, along with riders to enhance coverage. Invest in a cost-efficient pure insurance term policy today to safeguard the future of your loved ones and nurture their dreams.