How Term Insurance Protects Your Family?

What is Term Insurance?

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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How Term Insurance Protects Your Family?

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.

Tax Benefits

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

Why buy Term Insurance Policy?

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?

Claim Settlement Ratio

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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