Benefits of Term Life Insurance

Term insurance is insurance that is valid for a specific period of time and offers death benefit to the nominee in the event of the death of the insured. The premium for term insurance is low and is often the only factor that drives people to opt for term insurance.

Permanent life insurance, is exactly as the name suggests, insurance that covers you throughout your life. Premium for this type of life insurance is higher than that in term life insurance. There is death benefit that is exempted from any taxes.

Insurance is one of the best tax saving investments and for most people it is the first investment they make. But the choice between permanent life insurance and term insurance is difficult. Here are some of the benefits of term life insurance that may help you to make a better decision.

Some term insurance plans do come with maturity benefits, unlike traditional term insurance that don’t have any maturity benefits. These are called TROP. A Term Return of Premium plan provides income replacement and refunds the premiums at maturity, apart from offering all benefits of a traditional term life insurance plan. A TROP plan is a variant of pure term insurance plan and ensures maturity benefits, if the policyholder survives till the end of policy tenure.

A policyholder can enjoy tax benefits over the premiums paid for term life insurance plans with maturity benefits. The premiums paid and the amount received are exempted from income tax assessment under section 80C and 10 (10D) of the Indian Income Tax Act, 1961. Term life insurance plans with maturity benefits also offer additional term riders such as Critical Illness and Accidental Death or Disability riders.

Opting out of a term life policy is much easier than getting out of permanent life insurance policies. In term policies if you stop paying the premium the risk cover ceases and the policy ends. Nothing is payable to you as there is no savings element in the policy. However, permanent life insurance policies only give the full promised survival benefit if they are held for the full tenure of the policy. If you stop paying premiums mid-term you face a financial loss.