Term insurance is the purest form of life insurance. It only ensures financial protection in the event of the demise or disability of the insured person. Most insurance policies now are a blend of insurance and investment. Whether it’s ULIPs or other savings and guaranteed plans. But a term insurance plan does not involve an investment element. That is what makes it a preferred option for policyholders.
But what are the benefits of term insurance plans? How can you know what the term insurance premium that you will need to pay will be? How can a term plan calculator help you decide on the right policy? Find out here!
Benefits of Term Insurance Plans
Term insurance plans offer the following benefits that make them an ideal choice for policyholders:
- Affordable Premium: Term insurance plans are some of the most affordable plans. As they only offer insurance coverage, the premiums are quite low. This makes insurance accessible to a large section of society. Everyone can’t afford hefty insurance premiums. You can use the online term insurance premium calculator to calculate it.
- Huge Coverage: For term insurance, you can get a large coverage. Also, it has a relatively lower premium. The higher the sum assured, the safer your family is in case any unexpected event occurs.
- Tax Benefits: Term life insurance premiums are allowed as a deduction from your income. Under Section 80C of the Income Tax Act, 1961, term life insurance premiums up to INR 1.50 lakhs can be claimed as a deduction for each financial year. Suppose your income is INR 10 lakhs, and you pay a term life insurance premium of INR 80,000. So, you will have to pay income tax only on INR 9,20,000.
- Return of Premium: Return of premium is an option that some insurance companies offer for term life insurance. The insured event might not happen until the policy term expires. In such cases, policyholders are reimbursed for the premiums paid during the policy’s term. This also increases the benefit of term life insurance.
What are the factors affecting life insurance premiums?
Are you willing to buy a life insurance policy? Check these factors that can affect your life insurance premiums:
- Your Age: Your age determines the premium you need to pay. So, buy an insurance plan as early as possible. Because it is unlikely to have lifestyle disease or any chronic disorder when you are young. So, insurance companies charge lower premiums for younger people. As you age, your insurance premiums increase.
- Your Health: Your existing health condition impacts your life insurance premium directly. Healthy people pay relatively lower premiums. But if you already suffer from any disease or have any existing health conditions, you will have to pay a higher premium.
- Your Habits: Insurance companies inquire about your habits for life insurance coverage. If you have any bad habits like smoking, drinking, etc., then you will have to pay higher premiums. Since such habits can cause some threatening diseases in the future.
- Amount of Sum Insured: How much sum insured is enough to protect your family financially? You need to ask yourself this question before you buy a life insurance plan. Normally, your current age and your annual income are the bases upon which you decide your sum insured. Suppose you are 30 years old now. You have an annual income of INR 10 lakhs. You can work for the next 25 years. So, you need a life cover to protect your family for the next 25 years financially. It should also maintain the current lifestyle. So, a life cover of INR 2.5 crores will be sufficient (INR 10 lakhs * 25 years). This is just an example. Various other factors play a role in life insurance coverage.
- Add-ons: Life insurance plans offer add-ons to extend coverage. This gives all-around financial protection for your family. It can include accidental life insurance add-ons, disability add-ons, etc.
- Policy Term: The policy term you select impacts the premium you pay. The longer the tenure, the higher the premium.
How do I calculate the term life insurance premium?
It is easy to calculate. You can use the term insurance calculator to determine the insurance premium amount. Following are the inputs that you need to provide for using a term insurance premium calculator:
- Life Cover: How much life insurance coverage are you willing to buy?
- Your Age or Date of Birth: What is your date of birth?
- Habits: Do you consume tobacco or alcohol?
- Income: What is your annual income?
The term plan calculator will then tell you the premium you need to pay for your desired coverage. Here are some of the key benefits of using a term insurance calculator:
- Faster: You just need to provide the inputs, and the calculator will calculate the premium in just a few seconds.
- Comparison: Term insurance premium calculator allows comparisons of various plans. It helps you select the best one that suits your needs.
- Financial Planning: Using a term insurance calculator assists you in your financial planning. It provides upfront information about the premium amount and helps you budget accordingly.
Using a term insurance premium calculator has made it easier to make insurance decisions. You can easily know the insurance premium for different coverage amounts. Also, decide which one best suits your budget and insurance goals. While we aspire to grow, it is important to have a safety net. That is what life insurance does. For more useful information, visit Piramal Finance now!
Also Read: How to Calculate Your Retirement Planning?