Finance Blog


How Can Term Insurance Keep You Out Of Trouble?

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Ever wondered what will happen to your loved ones when you are gone? The other day I overheard someone saying in the train “Life main to kuch bhi ho sakta hai!” which means human life is unpredictable and risky at the same time. Recently we saw a sudden demise, of India’s most beloved actor “Sridevi”. The emotional trauma of the family is not measurable. All we can do is pray or her soul to rest in peace.

However that’s the life of a celebrity. What if such incident takes place in a common man’s life, where sudden death of the sole earning member of the family invites other trouble? This could be anything like paying off the house loan, taking care of the health of old members of the family and other basic necessities like food, clothing, shelter and overall lifestyle.

Disability insurance claim form with paperwork and digital tablet. Close up

The only thing which will keep you out of trouble is a “Term insurance policy”. With other traditional life insurance policies, the one who has gained a lot of appreciation and popularity is Term insurance policies.  Let’s find with a very simple example, of how can a Term insurance be of great use.


Ramesh works as an accountant in a reputed firm, and travels from Nallasopara to Churchgate by train. He apparently is the only earning member of the family. He met with a train accident and was immediately declared dead. With two aging parents, he was left by a house loan which he had bought recently. Sustaining lifestyle, home loan would become additional burden for his family. Below are the repercussions faced by his family members for not having a term insurance policy!

  • No peace of mind

Apart from emotional loss, the family had to go through the financial crisis due to sudden loss of income.

  • Losing Breadwinner of the family

His family was completely dependent on him right from paying the telephone bills, their daily survival was all dependent on Ramesh.

  • Daily necessity became a liability

Basic necessity like food, clothing shelter were difficult to manage.

  • Home loan debt

Ramesh had to pay a loan of Rs.32 lakh, which is next to impossible. The bank would not waive off the loan nor it is possible for his parents to pay off the loan, the only way out here is to let go off the house.

Advantages of having a term insurance policy

  • Pay-out is tax- free

The financial benefit that your family will receive after you are gone is tax free. Which means your family would receive the entire amount without any deductions. Thus relieving all your liabilities.

  • Will save tax when you are alive

The premium you pay has a maximum tax benefit of Rs.1.5 lakh, under the section 80 C of the Income Tax Act, 1961.

  • Your loved ones are taken care even when you are gone

I am sure there is nothing gratifying than seeing your family happy and smile. In Ramesh’s case if he had to buy a term insurance, his home loan would have been taken care off. At least his old parents would have got peace of mind.

  • Tension free present

Another added advantage of buying a term policy is that, you no more have to worry about future of your loved ones and enjoy your present.

However all said and done, unless we don’t know the Significance of Term Insurance”

  • Term insurance is a savior in all means. It offers coverage against the risks of life and is easily available in low premiums. Which means when a person dies, the death benefit will be paid to the beneficiary of the policy holder. This amount can be received in parts or lump sum or a combination of both.
  • As per good financial planning is concerned, term insurance plans are considered as the best form of insurance since it is the simplest form of insurance. It is also suitable for people with low incomes, as well as businessmen.

What are my options?

Since the time term insurance has gained popularity in India, wide range of options are available to choose from. However you need to disclose correct information to the insurance provider with respect to education, salary, medical history and overall profile. There are different types of policies available to choose from.

  • Standard Life Term Insurance Plan

These are the most commonly found type of plan. The premium and cover you pay annually does not change during the policy tenure and are available for 10, 15, 20 and 30 years.

  • Decreasing Term Plan Insurance Plan

This specific plan is made in such a way that the cover as well as the premium will keep on reducing when the policy period is decreasing. This type of plan is opted by the financial institutions covering major risks like housing loan, mortgage etc.

  • Increasing term insurance plan

This plan is the exact vice versa of the decreasing plan, wherein with increasing age the life cover also increases. This plan was basically structured keeping inflation in mind.

  • Lump sum benefit term insurance plan

In this type of term insurance plan, full claim amount is payable to the beneficiary or the nominee. This is the most simplest of all plans.

  • Income benefit term insurance plan

Income benefit term insurance are those plans where the insurance company promises to pay the beneficiary a certain amount in lump sum and some in on monthly basis for a fixed number of years.

Thus a Term insurance policy has now become “need of the hour”.

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