For all people who have dependent family members, the importance and need of having an insurance policy is tremendous. While no one like to think about the eventuality of death, it is essential for one to plan around it. In the absence of an insurance plan, your family will be left to fend for themselves in the unfortunate event of the breadwinner’s sudden demise. However, if you do have an insurance plan that you are covered under, your family will be financially protected in case you are not around to provide for them.
How Does Term Insurance Provide Pure Risk Protection:
When it comes to insurance, there are various types available. However, if you are looking for an insurance plan which provides absolute risk protection, then a term insurance plan is the answer. The basic premise of a term insurance plan is that it provides protection in the event of the sudden death of the policyholder. Only if the policyholder happens to pass away during the policy period will the policy make the benefit payment. This assured amount will be provided to the nominee/beneficiary of the policyholder.
Term insurance policies have no investment element as the money is only paid in case of the death of the policyholder before the expiry of the policy term. Term insurance plans are among one of the most affordable type of insurance since in a majority of cases, where the policyholder survives the term, the insurer does not have to make a payout. The premium paid only covers the event of death.
Key Benefits of Term Insurance that You Should Know:
- Pure risk coverage – Term plans are pure risk protection plans which provide cover in the event of death. They do not have any maturity benefit.
- Affordable premiums – The other notable benefit of a term plan is that the premiums are very low and hence, affordable. For an average term plan, the annual premium will cost about Rs.2000-3000, which provides death cover of up to Ra.10 lakh for a specified time period.
- Easy to understand – Term plans are very simple to understand and manage as they do not have any investment or savings component involved. As a result, a layman with little knowledge of insurance can also compare and buy a term plan easily.
- Easy to cancel – A term plan is as easy to take as it is to cancel. If you want to cancel your plan, all you have to do is stop paying the premiums for it. Once the premiums are ceased, the risk cover will automatically cease as well. Since there is no saving element involved in these policies, the policyholder will not receive any money back.
- Ideal for sole income earners – Term plans are best suited for those individuals who are the sole income earners in their family and want to ensure that their family is financially protected after their death.
- Protection against liabilities – A term loan is an ideal way to protect your dependents from the burden of financial liabilities in case of your demise. Short and long term liabilities like loan repayments, recurring household expenses, children’s education expenses, marriage, etc. are bound to arise with time. The benefit received from a term plan can help the dependents take care of all such expenses.
- Securing the future of your dependents – term insurance plans can help in insuring the future of your loved ones. Though without a savings or investment component, these plans can help provide one very valuable thing, which is peace of mind that your family stays financially secure after your death.