Term insurance policy is an extremely beneficial insurance policy that provides life cover. Through Term Insurance Plans, a policyholder can give their family a backup fund in their absence. But it would be best if you carried out the procedures of purchasing a term insurance plan with utmost caution. It will help reduce any unsolicited errors in claim approval during dire occasions. Read on to know more about these preventive measures before purchasing a term insurance plan.
A major element of purchasing a term insurance plan is understanding all the policy terms. Understanding those will help you realize what sort of a deal you are getting out of the plan. Several people who overlook these face problems down the road. If you are planning to purchase a term insurance plan, then there are a few other questions whose answers you must know. Given below are the answers to four such important questions.
How to Decide the Maturity Amount of Term Insurance?
Deciding the maturity amount of a term insurance plan will always be tough. It is because every person will need a different maturity amount based on their requirements and family financial position.
A good method to decide the maturity amount of term insurance is to consider the total annual family expense and multiply it by years. The years that you will multiply it with depend upon the years, your eldest child will reach the age of earning. Or you can set it according to the years your dependent would find another source of income. And in the case of elderly dependents, you can set it according to the years sufficient to last through their lifetime.
Apart from this, having provisions for inflation and increasing your maturity amount with the help of the forecasted inflation also helps in the long run. It will ensure that when the policy matures after several years, the money has not lost its value due to inflation.
What is the Optimum Policy Duration for Term Insurance?
Policy duration or term is an integral part of an insurance policy. Policy term is the duration through which you are eligible to receive a maturity benefit. And in case of survival, post the policy term, you will get the benefits yourself, if the terms of the policy so provide. Knowing the policy duration is a must for the policyholders to know how long they have a life insurance (life)cover.
A longer policy cover will always be advantageous, as the premium amount will drastically decrease. It will also protect you from the hassle of purchasing or renewing your policy every few years. Some good term insurance plans also give lifetime policy cover. So, even if you stop paying the premium at the policy payment term end, you will get a life cover as long as you live.
What Covers Should I Include in Term Insurance?
Knowing the covers to include in a term insurance plan is also necessary. The addition of add-ons covers reflects in your premium amount. So, it is advisable only to choose add-ons that provide direct assistance in your case. Some common add-ons that people prefer in their term insurance plans are family plans, critical illness cover, rider benefits, accidental cover, liability cover, and endowment plans for dependents.
What are the Tax Benefits of Investing in a Term Insurance Plan?
A term insurance plan premium can have a maximum deduction of INR 1,50,000 per year on income tax in India. These tax benefits depend mostly on the type of plan you choose and the policyholder’s age. There are extra benefits if the policyholder is below 18 or above 60. Not only is the return of capital from the policy tax-free, but even the maturity benefits in the form of interest rates also have tax benefits.
Understanding these crucial elements surrounding a term insurance plan will help you purchase one next time.