Term insurance is the simplest and inexpensive form of life insurance and indispensable for every household in today’s day and age. Yet, only 25% of India’s 1.25 billion citizens are protected by life insurance. Indians have low regard for things that don’t offer tangible returns. Perhaps, they think that term insurance, is a product that generally does not provide returns on maturity, is an unnecessary expense rather than an investment to secure the life of your loved ones.
Many people in our country will have no idea if you ask them: What is term insurance? A survey carried out by a leading insurance company and a market research firm in 2019 revealed that only 20% of respondents had bought a term insurance plan. Even those who are protected don’t have adequate protection, which means that the sum assured amount is not enough to sustain the family in the policyholder’s absence.
Low penetration and lack of awareness of life insurance protection have always been a problem in our country. Do you, as a dad or mom, know the importance of term insurance to protect your children? Are you adequately insured? Do you know what is term insurance? Do you want to know whether term insurance is an investment or an expense? Read on.
What is term insurance?
Term insurance is an inexpensive form of life insurance where the nominee receives a death benefit in case of death of the policyholder during the policy term. Generally, term life insurance is valid for a maximum term of 30 years. However, some term plans such as the Aegon Life iTerm Insurance Plan does provide cover up to 100 years.
Term life insurance is cost-effective, and you can get the benefit of a high sum assured by paying a nominal premium. With a term insurance policy, you don’t get any maturity value for the premiums paid by you during the term. However, if you purchase a term insurance plan with a return of premium option, you can get the amount that you have paid as premium.
Various types of life term insurance plans available in India include:
- Level term insurance plan
- Decreasing term insurance plan
- Increasing term insurance plan
- Term insurance with return of premium
- Single premium term insurance plan
- Limited premium payment term plan
Term insurance – Is it an expense?
Here are a few reasons why people think that term insurance is an expense.
- No return on investment
- Wrong comparison with traditional insurance plans and ULIPs that offer insurance protection and provides opportunities for wealth creation
- The belief that nothing bad can happen to them and their family
- Buying term insurance is to live life with a negative attitude
Why is term insurance a good investment?
When we say that term insurance is a good investment, we are not referring to returns on investment but the value that you get on your investment. Here are some good reasons why.
Cost-effective
Term insurance is a better investment compared to other forms of insurance because it provides you high-risk coverage or high sum assured by a paying less premium. If you are a 30-year-old, non-smoking male, you need to pay only Rs. 909 per month for a sum assured of Rs. 1 crore for a term of 20 years. The monthly premium for a traditional life insurance plan with the same sum assured will cost you thrice that amount.
Optimum financial security
Your investment portfolio may not guarantee or be adequate to take care of your family in your absence. However, a term insurance policy gives you the guarantee that your family will have enough financial support to carry on with their lives with the death benefit.
Effective in meeting liabilities
You may have a car loan, a home loan or a business loan that you are repaying now. Who will be paying that off when you are not here? Term life insurance provides a safety net to your family and helps them pay off the debt and avoid legal liabilities. Therefore, when you buy a term plan, ensure that debt repayment, expenses, inflation, and financial goals are taken into account when you select the sum assured amount.
Source of regular income
If you are the sole breadwinner for the family, a lack of regular income can put tremendous strain on the lives of your loved ones. With a term insurance plan, your nominee can opt to receive the payout in a lump sum or as a regular monthly income to take care of monthly expenses and investments.
No obstacles in meeting life goals
You may have dreamt of your child acquiring higher education from an esteemed university abroad or planned for their marriage. Dreams and plans don’t have to hit a roadblock with a term insurance plan as all the financial requirements are met even in your absence.
There is no doubt that term insurance is an investment for a secure future and not an unnecessary expense. Knowing that your loved ones are secure even when you do not around give you an immense feeling of financial security and freedom.
In order to secure your loved ones’ future, you can buy the Aegon Life iTerm Insurance Plus Plan today and get comprehensive term insurance coverage. You can secure coverage for up to 80 years of age and enhance your plan benefits by opting for coverage of up to 36 critical illnesses.
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