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How Term Insurance Protects Your Family?

IndianMoney.com Research Team | Posted On Friday, April 26,2019, 05:09 PM

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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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