Reasons Why Term Insurance is Profitable over Other Investments

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  | Published: 04 December 2020 | Last Updated On: 08 February 2021

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Term insurance is a sub -category of life insurance policies where the policy holder pays a premium amount at regular time intervals be it quarterly, annually, or semi-annually. The insurance provider on the other hand provides a sum assured to the nominee or the beneficiary in the unfortunate circumstance of the insured’s untimely death during the active term of the policy.

If however, the insured survives the policy term, a term insurance policy does not offer any maturity benefits in that case. Henceforth, term plans have gotten the name of pure protection plans. Though over the past few years, insurance providers have conceived term plans that certainly pay a certain percentage of the total paid premium back in case the insured survives the term of the policy. 

These are the most affordable type of life insurance policies available in the market and can be easily bought online, offering you a convenient, hassle-free experience. Like other life insurance policies, term plans also come with tax benefits. Even the death benefit one gets under term insurance is tax-free excluding some specified conditions, similar to other life insurance plans. These plans offer care and safeguard the future of your family as much as they protect the insured. We have tried to discuss underneath all the convincing reasons behind investing in a life insurance policy over other forms of investments and why is it an essential step for every individual to take.

Assurance and security: The first reason propounded in favour of a term insurance policy is the security it offers to loved ones after you are gone. This should be the driving factor behind choosing a term plan for most people. It insures life and it assures the mind that your family will not have to worry about their finances in times of uncertainty.

A plan for retirement: Retirement is believed to be every individual’s second innings in life but it can sometimes be difficult if it pushes them into uncertainty. If your source of income is removed or reduced drastically, retirement can be extremely hard as opposed to being another adventure of life. To avoid this stress, invest in term insurance plans that will offer ample funds to sponsor your second innings even in the absence of steady employment. Putting your hard-earned money into pension plans allows you to enjoy the fruits of your labour after retirement.

Debt payment: Sometimes circumstances force you to take up debts but you can never predict how life unfolds. If an unpropitious event takes you away from your family, this debt will be another burden that befalls them. A term insurance plan offers a guarantee to pay off your debts. Freeing your family of having to deal with financial liabilities in the form of a loan, life insurance policies prove to a guardian looking out for your family. Regardless of whether it is a personal loan, a property loan, an auto loan, or a credit loan, buying a term plan will make sure that they are paid off and your family never has to struggle financially.

Tax benefits: As stated before, one of the most appealing features of life insurance is its tax savings benefit. Regardless of what plan you have chosen, just like term insurance, all other life insurance policies come with this benefit of saving taxes.

Good for business: A term plan not only offers protection to you and your loved ones, but it also helps protect your business. A term life insurance policy, like many other life insurance plans, gives protection to your business for a fixed term. In the event of your unfortunate death, a term plan will give the benefits for your business.

Highly Flexible: Among the many advantages of term insurance, flexibility is one of the most prominent. These plans can be bought online as well as offline as per your convenience. Also, in contrast with other life insurance plans, these do not necessarily require a health check-up before buying the policy. A simple declaration given at the time of applying for the plan is enough.

These plans are also customizable to suit your personal requirements. You can choose from a list of riders without altering the basic plan in an attempt to provide an additional shield to your family.

Additional riders: Term insurance comes with a bunch of extra benefits at very nominal costs. There are critical illness waivers, permanent or partial disability waivers, accidental death waiver, or waiver of premium are just some of the options available if you choose to buy a term plan. Depending on your requirements, you can choose one or more of these options. For instance, if you are employed in a risky field, a permanent or partial disability rider and waiver of premium can be useful. These do come at an additional cost and these costs can vary from one company to another. Explore all your options before picking the one that best meets your needs.

Brokerage is low: Most investment options have become a thriving avenue of business for brokers or middlemen. Most life insurance policies too have commissions charged by agents and this can be a recurring expense. Every time the insured pays the premium, a certain percentage of it goes directly into the pocket of the broker. This percentage differs from one insurance provider to another as well as from one plan to the other.

With term insurance, however, the brokerage is initially high but after a period of time, the percentage of brokerage reduces. Compared to other forms of investment, this cost of brokerage is only 5 to 6 percent. Apart from that, if one was to book their term plan online, this brokerage cost will be zero.

Affordable premiums: Premiums or instalments are a necessary part of any investment option. Term plans however have premiums far lower than any of their other counterparts. As a matter of fact, among all types of life insurance plans, term insurance has the lowest premiums. Such low premiums are ideal for being able to afford an appropriate sum assured that gives enough financial support to your family. Endowment plans on the contrary have significantly higher premiums that make them unaffordable for a lot of people.

Claim rejection is low: if the insurance policy has been active for more than a period of 10 years, claim rejection is generally lower. Term plans usually have a lower risk of claim rejection, making them once again a better investment alternative.

Saving instrument: Term plans are a good way to save money just like a kid does with his piggy bank. Starting early will ensure that the amount amassed is significantly enough to sustain your loved ones without any worries.

In a Nutshell

Death is the biggest tragedy and it is unavoidable. However, you can reduce the blow it cause by buying a term insurance cover that makes sure that your family is not left helpless in your absence. Term plans are a necessary part of a holistic financial future planning and its advantages far outweigh any other mode of investment.