Why Term Insurance is Important? - Top 7 Reasons (2024)

Life is unpredictable! Sometimes it surprises you in amazing ways, bringing you great fortune. At other times, it shocks you with uncertain events, resulting in instability. For example, a pandemic. In most cases, these unforeseen situations rip you off your savings, leaving you struggling to survive. This is why preparing for such times is crucial.

Today, it is essential to diversify your investment. This ensures that it not only pays for you today but also allows you to secure your family’s future. Among the various investment options available today, insurance has become an essential aspect of financial planning. It provides much-needed financial cover for your loved ones and also assists you in fulfilling financial goals.

While everyone knows its importance, many people delay getting insurance because they think they cannot afford it. If you are one of them, then term insurance plans are here to your rescue!

One of the most economical insurance policies out there, a term life insurance policy is a great place to begin securing your financial future. So, what is it, and why should you buy a term insurance plan? Read on to find out.

Understanding Term Insurance India

A type of life insurance, a term policy offers coverage for a specific term or tenure. It is a pure form of insurance that protects your family financially in the case of your demise during the policy term.

Since term insurance plans provide no other monetary value except for the death benefit, they are usually affordable as compared to other insurance. It is, therefore, a basic form of financial protection that you can get to fulfil your needs of securing your loved ones’ future.

Importance of Term Insurance: Reasons Why You Should Buy One

What makes term insurance in India a popular option are the numerous advantages it offers. Whether you are young or in your middle age, a term insurance cover can be extremely helpful in different ways. Let’s look at the many reasons why you should get a term plan.

• Comprehensive coverage at affordable premiumsA prominent reason to buy term insurance is its cost-effectiveness. As discussed above, this type of coverage provides financial protection to your loved ones in the event of your death. Since it involves no investment element, the premiums charged are less than other kinds of insurance.

  Depending on your age, health factors, the sum assured, and the time you choose for the policy, premiums can be inexpensive. If you are young and healthy, the premiums can be much lesser! Moreover, it gives you extensive coverage, i.e. the sum assured is typically more than the premiums you pay. You get a greater amount of coverage for much less, making term policy a must-have.

• Complete life coverThere are several term plans available out there for you to select. Many policies, like the TATA AIA policy , provide longer coverage. You can get a full life cover up to 100 years of age. This, in turn, ensures that your family is protected for their whole life. A term insurance benefit that makes it a lucrative choice.
• Cover against illnessGetting diagnosed with an illness, especially chronic or terminal, can be distressing, both emotionally and financially. During such times, having insurance can be handy. Usually, the sum assured offered by term insurance plans is enough to support your family financially if a medical emergency arises. Plus, most term life insurance policies provide a specific percentage of the sum assured as a payout if there is a terminal illness diagnosis.
• Choice of income payoutAs mentioned before, a term insurance cover pays the sum assured to your family in the unfortunate event of your demise. Now, the payout can be done in different ways, and the choice is yours. You can choose to get the sum assured paid in lump sum or as monthly income or a combination of both as per your requirements. This makes it easier for your family to sustain on a day-to-day basis in your absence.
• Additional coverage with riders^#
  It is unimaginable to see your loved ones suffer if you are stuck with the uncertainty that leaves you without an income or disabled. While a term life insurance policy helps, having extra coverage doesn’t hurt. Term plans usually come with riders^# or extra benefits that act as a helping hand during such times. Different riders cover different events such as critical illness, disability, accidental death, hospitalisation, etc. Although buying them means paying an extra premium, they can be valuable in difficult times.
• Low claim rejectionTerm insurance typically has a good ratio of claim settlement. TATA AIA policy has an individual life claim settlement ratio¹ of 98.53% in the financial year 2021-2022. When you apply for a life insurance policy, including a term policy, you are required to disclose information regarding your age, income, health history, and more. It is important to answer everything truthfully. This way, you can ensure you have no issues with settling your claim when the need arises.
• Survival benefitsGenerally, a regular term plan does not provide any maturity if you survive the entire term of the policy. However, insurers give a certain portion of premiums as part of the return of premium² option if nothing happens to you till the policy matures. If you survive the whole term, you can get as much as 105% of the total premiums paid. Another term insurance benefit that can be useful in critical times.
  

Conclusion

While these were some; there are many more advantages of getting a term insurance policy. Flexible premium payment options, tax* savings, and low premium rates for women are some of them.

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