You will be surprised how contradictory our logic can be when you read about buying of term insurance plans in our country!

I bet there is hardly any earning spouse or parent who will deny the fact that they love their spouse, parents, siblings and children, and own up the responsibility to make sure they are all taken care of as long as required.  But here is an analysis that will surprise you.

If I were to do a survey in India, among those families with an annual income of at least Rs. 3 lakhs, this is what I could expect.

No. of people who will say they  want to see them financially protected                =             100%

However,

No. of people who have protected their families adequately                                        =             less than 1%

No. of people who have protected their families, but not adequately                       =             about 15%

No. of people who have not protected their families at all                                             =             about 84%

Why this contradictory behavior?

For those who are unaware of the ‘power of cover’ through term insurance – it is the lack of knowledge since their life insurance agent would not have suggested this product (Click here to know why).  A majority will fall under this category.

For the others who are fully aware what term insurance is and have chosen to ignore it – it is the denial of death ever happening to them! Or the belief that term insurance is perhaps a waste of money!

Fortunately, more and more people are becoming aware and rational, especially if they see a close friend’s, cousin’s or colleague’s family going through financial problems due to early death of their earning member.

So what is term insurance?

Term Insurance or life term insurance plan or term assurance plan is a pure life insurance plan.  You pay a fixed premium every year (or once) for a chosen period of time (called “policy term” and it should be ideally till your retirement year).

In case you die during this period, your family gets the insured amount (called Sum Assured) and the policy ends.

In case you don’t die till the end of the insurance period, no money is returned to you, and the policy ends.

And what does term insurance cost me?

Very little.

At the time of writing this article, a healthy, non-smoking Indian male of age 35 years can get a regular premium online term insurance plan with life insurance cover of Rs. 1 crore for a 20-year period, for as low as Rs. 30,000 per year!  And that’s really so small when you look at the benefit (and value) it can give your family if you were to indeed die!

You can also get added protection for incidents such as death due to accident, by paying marginally higher premium.

What are its benefits?

For this small amount, your future salaries, all your liabilities such as home loans and credit card debts could be completed paid out by your term insurance plan!   An increasing number of mature and responsible spouses and parents in India, who are also earning members, have realized this value and are buying term insurance, especially through online which takes only 10-15 minutes.  “I don’t have time to buy” can’t be an excuse now!  🙂

What are the Tax Benefits of Term Insurance in India?

• All Premiums paid are exempt from tax under section 80C (up to the limit of Rs. 1 lakh allowed)
• Payout from a Term Insurance plan (death claim) is fully exempt from tax under section 10(10(d)) of the Income Tax Act.
• Read this to know more about the double benefits in taxation that only life insurance policies offer.

You would have now understood the power of cover.  But before you buy one, be sure of which type of plan you need and how to get best value.