Know the Facts before You Buy a Term Insurance

July 21, 2021

The term insurance provides coverage for a specific period of time. It provides sum assured to the nominee if the insured expires during the term of the policy. It provides your family the financial security in your absence. The term insurance is known for their low premiums. The premium goes directly to cover the life risk. The minimum age of a person to buy a term plan starts from 18 years and the maximum age limit will vary from one insurance company to another.

Let us now discuss some important facts about term insurance:

Life Cover at Affordable Premium

For a family with a sole breadwinner, term insurance is a must to have. This would provide a large cover for the family to protect their financial needs after his demise while paying an affordable premium.

Also, in cases where there is already a huge loan, like housing loan, it serves as the best option. Similarly, people who have invested in new investments, by borrowing at high-interest rates, and are anxious about covering the loans before dying can also opt for a term plan, as it is cheaper and also will cover the risk with the benefit.

Disclosure of information

People tend to hide information while dealing with insurance companies so as to reduce the amount of premium they pay. This is not a very wise decision as hiding facts about the lifestyle habits and how they affect one’s health might result in claim rejection as and when the insured dies. One should always be honest while disclosing the key information to the insurance company while buying the policy.

The pricing strategy

While choosing between plans, people tend to focus on Rs 20 per day value rather than paying Rs 6000 per annum. This is a simple marketing strategy used to make an illusion that Rs 20 deal is going to be cheaper than Rs 6000 per annum, whereas Rs 20 per day plan is going to be more expensive. Also, it is seen that companies increase their premium rates after the medical examination. This is because the insurance company decides a value after taking your overall health into consideration. This reduces the chances of claim rejection.

Tax benefits

buy term insurance policy Section 80C and section 10(10D) of the Income Tax Act provides tax benefits on insurance. Section 80C specifies the tax exemption of premiums up to Rs 1.5 lakh per annum. Under section 10(10D), you can save tax on the death benefit received by the nominee.

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