Ask yourself a simple question: if your income stopped tomorrow, how long could your family maintain its lifestyle, pay the EMIs and keep the children's education on track? Term insurance exists to answer that question.
What term insurance does
You pay a premium for a fixed period, and if the policyholder passes away during that period, the nominee receives the sum assured. There is no maturity payout in a pure term plan, which is exactly why the premium is so low compared with other life insurance products.
Who needs it the most
- Anyone with dependents, such as a spouse, children or parents.
- People with a home loan, car loan or other liabilities.
- Single-income families.
- Business owners and self-employed people whose income would stop without them.
How much cover is enough
A common starting point is ten to fifteen times your annual income, adjusted for your loans, your family's expenses and your existing savings. Younger buyers should consider more, since they have more years of income to protect. It is better to work this out with a proper calculation than to guess.
Buy early, buy long
Premiums are lower when you are young and healthy and stay fixed for the policy term. Waiting a few years can raise the cost, and a health issue in the meantime can make cover more expensive or harder to get. Choose a term that runs until your major responsibilities end, usually until around retirement age.
Things to check before buying
- The insurer's claim settlement record and how quickly claims are processed.
- Riders such as critical illness or accidental death, and whether you really need them.
- Payout options: lump sum, monthly income or a mix of both.
- Honest disclosure. Share your health, habits and income accurately so a future claim is not disputed.
Tax benefits
Premiums may qualify for a deduction under Section 80C, and the payout to the nominee is generally tax-free under Section 10(10D), subject to conditions and current law.
Insurance is a subject matter of solicitation. Please read the policy wordings and brochure carefully before buying.
FinMighty TeamInvestment, loan & insurance advisors, JaipurThis article is for general information only and is not personalised financial, tax or legal advice. Please see our Disclaimer.
