Term insurance is a simple and affordable option to ensure the financial security of your family in case of anunfortunate incident. These pure life covers pay the monetary benefits to your beneficiaries if something untoward happens during the policy duration.
As the entire amount covers only mortality charges, the premium on term plans is lower as compared to other life insurance policies. Some of the leading insurers offer such plans at competitive premiums.
However, in April 2020, several insurance companies had increased their premiums. The estimated hike is between 20% to 35%; this figure varies among insurers. Even with the recent increase, it is still not too late to avail of a life insurance term plan. This is because premiums are further expected to increase by as much as 40% soon.
How does the premium hike affect you?
If you are a 25-year non-smoker male, the premium for an INR 2 crore cover for 25 years would cost you around INR 11,000 per year. If the premium increases by 40%, the annual cost to avail of the same coverage would rise to INR 15,400. Over the entire policy period, the total extra money you would spend is about INR 1.1 lakh. Therefore, do not delay your decision and get insurance coverage today. To know more, use an online term plan premium calculator before making your choice.
Why is the premium expected to increase?
To determine the premium, as per an assumption, for every 10,000 people covered under a term plan, only three deaths will occur in a year. However, the actual annual deaths in India range from4to 4.5. Moreover, generally, the claim amounts for term plans are higher than other life insurance plans, wherein the average sum assured is approximately INR 1 crore. The ideal ratio of expected versus actual demises should be 1:1, which is not true in the case of India. The ratio is higher than estimated, resulting in negative mortality. As a result, the insurance premium may increase for term insurance.
Having understood what is term plan and how to calculate the premium, here are three reasons why buying insurance at an early age is beneficial:
- Lower premium
When you are young, it is most likely that you are healthy and do not have any chronic medical issues. Therefore, insurers consider you as a low-risk client, which means you qualify for an affordable premium. Moreover, as the premiums are pocket-friendly, you may opt for a higher cover for the financial security of your family in your absence.
- Constant premium
A term plan comes with a pre-determined period. Your beneficiaries get the sum assured in case of an unfortunate event during this tenure. Another benefit of buying term insurance when you are young is that the premium remains constant for the entire duration of the policy. This allows you to avail of a higher sum assured at a young age that will benefit your family to sustain their lifestyle in your absence.
- Tax benefits
Don’t you always want to find ways to reduce your tax liability and save money? Term insurance gives you an option to decrease your taxes. The premium that you pay for the term plan is eligible for a tax deduction up to INR 1.5 lakh under section 80C of the Income Tax Act, 1961. Additionally, the death benefits are tax-free under Section 10(10D) of the Act.
Planning for the future is a pre-requisite to provide financial security to your family. A reliable term plan plays a vital role in helping you achieve this goal. Get one today before the premium rises again.
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