We live in a world filled with risks and uncertainties. People, their families, their properties and their assets are constantly at exposed to a variety of risks. Insurance plans are a vital part of every person’s life for it acts as a safety net for when an individual is in need of monetary assistance due to certain circumstances. In the finance industry, there is a large assortment of insurance plans ranging from health, home, vehicle, travel and even life insurance that an individual can opt for to protect his assets better and be equipped to handle any unfortunate incident that were to occur concerning the particular insurance policy.
Before proceeding further, it is crucial to know what is term insurance and what is meant by pure protection plan.
What is term insurance?
Term insurance or term life insurance is life insurance that provides coverage for payment at a particular allotted fixed rate for a certain period as agreed during the initiation of the policy. This fixed term is the relevant term. If the insured individual happens to pass away before the end of the tenure of the life policy, then the death benefit from the policy is paid to the beneficiary as per mentioned in the policy itself during its agreement.
Term insurance is generally the most effective and least expensive method of paying a substantial amount of death benefit
What is meant by pure protection plan?
Pure protection plans or pure term plan is plan that secure and protect you for a particular period in exchange for a regular fixed premium. Term insurances are by far the easiest and also the most monetarily effective method of providing future and continuous financial support and security for your dependants if you meet with any unforeseen tragedies.
Term insurance as a pure protection plan
Term insurance is the purest form of insurance payment the pays a premeditated amount of money to those who are mentioned as your dependents for a specific period if the insured dies during that time. After the demise of the insured, the term insurance of the life insurance policy pays the face value of the policy itself to the beneficiary or nominated individual mentioned in the policy at the time of the agreement. The cost of insurance protection with no survival benefit is covered by all the premiums that are paid.
The insurance coverage ends with the completion of the term of the policy until and unless it is renewed before the expiry of the policy. This is the greatest and the most advantageous way of providing financial support and security to your dependents if you happen to meet your unforeseen death
Advantages of term insurance as a pure protection plan
A term insurance plan has some benefits that are suited to any insurer looking to provide security and protection to his or her nominees.
Financial Security: this benefit is most advantageous to those who are the chief earners of sustenance in a family or group. Term insurance provides financial security for those looking for a way out during times for monetary crunch. In the event of the death of the prime earner, the sum assured can be used by the dependant to clear of any outstanding loans, child education fees, carry on with daily household expenses and any other liabilities that need to be taken care of.
Customizability: term insurances are customizable. This means that you as an insurer can select the coverage amount, the period of the term for the policy and even the chose whether the payout option will be a lump sum plan or an income replacement term plan. You can choose the payout option depending on your family condition. If your family cannot afford to make a lump sum payment in your absence, you can customize the term insurance so that the payout can be done via a term insurance plan for income replacement. Here the payout can be done concerning the family monthly earning over a period.
Paid sub-features: if you so desire, then the coverage can be widened with the help of paid and optional features under term insurance plan. These sub-features of term insurance are called term plan riders. There are various types of term insurance riders:-
~total and permanent disability
~accidental death benefit
~waiver of premium
Any of the above term insurance rider and be opted for by the insured to widen the coverage of his or her term insurance in general.
Tax Benefits: under Section10 ( 10 D ) of the Income Tax Act, the payout of the term insurance is tax-free and also under Section 80 C of the Income Tax Act, all premiums that are paid by the insured are also liable to tax deductions.
Simplicity: term insurance is a simple and uncomplicated insurance product. There are not convoluted rules or schemes that need to be critically understood. It is a simple and easy process. This is not a frill-product. Simply by comparing and buying the term insurance that best suits you on an online platform is all that is required.
Reduced Premiums: Best term insurance plans are relatively cheaper than most insurance products that are out there. As a pure protection plan, there is no investment component in term insurance. The only cover is of the untimely death of the insured. This means that the only premiums that are calculated are ones for mortality charge.
Higher assured sum: you can opt for lower and higher assured sums according to t your comfort zone. This will help assure you that your family will still be financially secure if you are not there anymore to support them.
In such a case, the family of the insured will be left with a high corpus. This will help them achieve independency and will be able to make it through hard times more easily and comfortably.
Online Availability of term insurance
Being such a simple insurance product, one can look for and find a term life insurance online with ease. There, one can collect data and information about the various types of policies and the features of each policy. Being customizable, a potential insurance holder can customize their term insurance so that they may reap the maximum benefit out from it and in the event of the death of the insured, his or her family will be able to avoid a financial crisis.
The most effective way to choose term insurance is to compare and contrast between policies online. Online availability allows one to compare different term insurance policies of different insurance companies and choose the one which best suits you.
Once you have found the right term insurance for you, you can pay the premium online itself and save yourself a lot of hassles.
Term insurance is a very viable and popular choice as a pure protection plan that will allow the dependants of the insured to be monetary viable even after his or her death.
There are but a few limitations of term insurance as a pure protection plan:
~ The premium amount for the policy tends to increase with age. This means that those who are young will have to pay less amount of premium than those who are comparatively older for the same amount of sum assured. A person who is of age 25 years will have to pay less amount of premium for an assured sum as whereas those above the age of 25 years will have to play a relatively higher amount of premium even if it is for the same amount of sum assured.
~This type of plan is not very suitable if the target is wealth generation. Term insurance primarily focuses on helping the family of the insured remain monetarily viable after the death his or her death during the term for the policy. And long term or short term goals like children’s education or retirement is not applicable to this type of scheme.
~The age for the maturity of the policy is not according to the lifespan of the insured. To be able to make the most of the death benefit, the death of the policyholder must occur within the stipulated period. Only If the demise of the policyholder happens during the tenure of the policy, will the family of the insured be given the assured sum. If the policyholder dies after the completion of the period, no assured sum or death benefit can be claimed by the nominees or beneficiaries mentioned by the late policyholder.
~Finally, the maximum amount of coverage that can be acquired is limited. The annual income of the policyholder restricts the coverage of term insurance even with added term insurance riders.
Bearing all this on the mind, Term insurance is a great and easy, pure protection plan that will allow you to ensure that even after your death, your family and loved ones will be able to continue and comfortably have the financial strength to sustain themselves.