Your family is vulnerable due to the uncertainties in life. As an earning member, any untoward incident can result in financial disruption for your loved ones. A term insurance plan is an affordable way to protect your family members from monetary instability in your absence.
A regular term insurance plan pays the policy benefits if an unexpected circumstance occurs during its duration. The money can help your family meet their day-to-day expenses or pay-off any outstanding debt, ensuring their financial security. Most term plans do not have any maturity or survival benefits.
About guaranteed term plan
Several insurers now offer a term policy that returns the total premium paid at the end of the duration as per the terms and conditions. You can plan your finances to meet goals, like paying for your child’s education or buying a home or car.
Here are three guaranteed term insurance benefits:
- Return of premium
Apart from ensuring the financial protection of your family in case of a tragic event, you receive the entire premium paid at the end of the plan’s duration on survival, which you can use for various purposes.
- Tax exemptions
The premium paid on term insurance is eligible for a deduction up to INR 1.5 lakh under Section 80C of the Income Tax Act, 1961. Another guaranteed term insurance benefit is that the amount received on maturity or an unforeseen circumstance is tax-free under Section 10(10D) of the Act.
- Additional coverage
You can increase the coverage under the basic policy by including several riders (add-ons). Some add-ons that you can consider including are critical illness, partial or total disability, and waiver of premium. Before adding riders, determine your requirements, as every addition increases the policy premium.
Differences between a pure and guaranteed term insurance plan
Although both these types of term insurance in India offer life coverage, there are some distinguishing factors between the two. Here, we have compared the two term plans based on aspects, like:
When compared to a regular term plan, guaranteed term insurance policies offer lower policy benefits to your family in case of your sudden absence. You can compare the different policy benefits provided by various insurance companies to find the most suitable plan for your requirements.
- Health conditions
When you buy a term insurance policy, the premium is based on several factors, like your age, health condition, and life expectancy. Most insurers require you to undergo a medical checkup prior to issuing the policy. However, if you opt for a guaranteed term plan, you may not require a medical checkup. Therefore, if you have any pre-existing diseases, you will still be able to buy a guaranteed term plan, as the insurer cannot reject your application based on your medical condition.
- Graded benefits
Most term policies pay the entire benefit to your beneficiaries as a lump sum or a regular payout over a pre-determined period if something unfortunate happens to you. However, a guaranteed term plan offers graded benefits in case of your sudden absence based on its date of commencement. Therefore, your beneficiaries would not receive the entire policy benefits if the plan has not been in force for a particular period. This ensures that the insurer does not have to immediately pay a huge amount to your beneficiaries in your absence, as you may have brought the policy when you were diagnosed with a critical illness and wanted to provide a higher sum assured for your family.
You can purchase a pure term plan at an economical premium when you are young and healthy. Moreover, the entire premium is used for life cover, making it a cost-effective option. A guaranteed term plan is slightly more expensive, as there is no need for a medical checkup, and the insurer returns the total premium if you outlive the policy term.
A guaranteed policy is advisable if you have any existing medical ailments. Before you make your choice, consider factors like lifetime renewability and clauses mentioned in the fine print to make an informed decision.