Term insurance is the most basic form of life insurance. It is pure risk protection. Term plans offer life protection over a fixed term in exchange for periodic premiums. The insured pays premiums to keep the policy active. Term insurance policy pays out the sum assured, which is also referred to as death benefits, to the nominee or beneficiary, if the insured dies within the term of the policy. If you happen to survive the term of the policy, there are no survival benefits.
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Just imagine this; you are the breadwinner of your family and you have ailing parents who are in their late 60s. Wife is a homemaker and your two children are studying in the high school. The entire family is dependent on your income. If something happens to you, then who would take care of loved ones? Who is going to bear the medical expenses of your parents? Who is going to pay your children’s tuition fees? Who is going to provide for the family? Well, these questions are certain to send chills down your spine. An answer to these questions would be to avail a term insurance policy.
The modern world is full of uncertainty. You can answer this uncertainty by availing a term life policy. Term insurance policy serves as a substitute for income on an unexpected demise. Your family can continue to pursue the same lifestyle, they currently enjoy. Children can still pursue their education and medical expenses of your parents are taken care of. Outstanding dues can be settled with the proceeds of the term life plan.
Availing a term life policy offers the twin benefits of securing family’s financial future and tax benefits. Premiums paid towards term plans are eligible for tax deductions under Section 80C of the Income Tax Act. The maximum tax deduction is Rs 1,50,000 a year under this Section.
SEE ALSO: Best Term Insurance Plans In India
Here's an example on how term life plans protect your family.
Imagine this; you have a family of 5 and you are the breadwinner. Your daughter is in class XII and your parents are in their late 60s and require regular medical assistance, while your wife is a homemaker. You have an outstanding home loan of Rs 30 Lakhs. Your entire family is dependent on your income. Your daughter has the ambition of pursuing an MBA in the United States of America. After her education, you have to get her married. You are the only person in the family who can bear the tuition fees of your daughter. She still has a long way to go. Forget education abroad, education in India itself is expensive these days. If something happens to you, then who would take care of these expenses? Should your daughter give up on her dream of studying in USA?
To avoid this scenario, you must avail a term insurance policy with sufficient coverage. Your liabilities would be covered. You don’t have to worry if something happens to you as your family’s future is secure. Proceeds of the term life policy can be used for any purpose. Your daughter’s dream of studying in USA can still be realized. Your home loan would be cleared off.
Avail the right term insurance policy and safeguard the future of family members. You enjoy peace of mind, knowing that your family can still lead a normal life, even when you are not around. The best part of term insurance is that proceeds received as death benefits are completely tax exempt.
SEE ALSO: How is Term Insurance Premium Calculated?
Before you choose an insurer, it is extremely important that you check the claim settlement ratio. Claim settlement ratio gives the number of claims settled by the insurer against the number of claims filed. Higher the claim settlement ratio, better the insurer. You must avail the term life policy from those insurers who have the maximum claim settlement ratio. The entire purpose of availing a term life policy is defeated if the claim filed by your nominee or beneficiary is not honored. You must keep this in mind when availing a term life policy.
The table below shows the claim settlement ratio of various life insurers in India:
Life Insurer |
Claims Pending at the start of the period |
Claims Intimated |
Total Claims (Claims Pending + Claims Intimated) |
Claims Paid |
CSR% |
(FY 2016-17) |
(FY 2016-17) |
(FY 2017-18) |
|||
Max Life |
3 |
10329 |
10332 |
10152 |
98.26 |
LIC |
3203 |
735879 |
739082 |
724596 |
98.04 |
Tata AIA |
0 |
2850 |
2850 |
2793 |
98 |
ICICI Prudential |
36 |
11423 |
11459 |
11216 |
97.88 |
HDFC Life |
79 |
12645 |
12724 |
12421 |
97.8 |
Bharti Axa |
34 |
854 |
888 |
860 |
96.85 |
Exide Life |
0 |
3357 |
3357 |
3250 |
96.81 |
SBI Life |
298 |
17312 |
17610 |
17027 |
96.76 |
DHFL Pramerica |
6 |
586 |
592 |
572 |
96.62 |
Birla Sunlife |
48 |
5443 |
5491 |
5292 |
96.38 |
Aegon Life |
5 |
583 |
588 |
571 |
95.67 |
Edelweiss Tokio Life |
0 |
189 |
189 |
180 |
95.24 |
Canara HSBC OBC |
1 |
836 |
837 |
797 |
95.22 |
Reliance Life |
35 |
8952 |
8987 |
8553 |
95.17 |
Aviva |
7 |
1111 |
1118 |
1056 |
94.45 |
Bajaj Allianz |
63 |
14252 |
14315 |
13176 |
92.04 |
Future Generali |
17 |
1274 |
1291 |
1202 |
93.11 |
IDBI Federal |
7 |
1154 |
1161 |
1068 |
91.99 |
Kotak Life |
19 |
3055 |
3074 |
2881 |
93.72 |
PNB MetLife |
108 |
3981 |
4089 |
3726 |
91.12 |
Star Union Life |
19 |
1222 |
1241 |
1145 |
92.26 |
India First |
29 |
1781 |
1810 |
1626 |
89.83 |
Sahara Life |
26 |
646 |
672 |
556 |
82.74 |
Shriram Life |
293 |
2853 |
3146 |
2524 |
80.23 |
Industry Figures |
4145 |
843841 |
847986 |
828314 |
93.07% |
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