Do you know the penetration of life insurance products in India is 3% of the total GDP in FY 2023? Most of us believe that term insurance is meant for the breadwinner of the family. However, term insurance is one of the most basic types of life insurance that provides comprehensive financial protection to your dependents in case of your untimely demise.
Furthermore, because term insurance for housewife is just for protection, it is less expensive than most other types of life insurance plans available on the market. It is intended to provide death benefits to your loved ones in order to help them meet their financial obligations, such as your children’s education, loan repayment, and maintaining their standard of living. In this article, we will understand what makes a term insurance plan so inexpensive and affordable:
- No fund management fees: Term plans, whether it is for term insurance for housewife or for a husband, have no investing component attached to them; it is a pure insurance product. In other insurance plans such as ULIP, one part of your premium is invested in the market and necessitates constant monitoring and thus, typically incurs an additional fee for fund management. Term insurance has no portfolio, money management, or administrative fees or charges because it is not a wealth-creation tool. As a result, insurers can provide competitive premium rates for you to pick from.
- Limited by term: Many people assume that term insurance plans provide limited coverage as they come with a low premium. However, this is far from true. A term insurance policy provides a large sum assured at minimal rates.
- Get high coverage at a low premium: Term insurance is frequently the first insurance product people choose early in their lives since it provides a high sum assured coverage at a nominal price. If you start early, your monthly outgo will be low, as can be checked by the term insurance calculator, making it accessible to young people who want the security of an insurance umbrella.
- Provides ease of convenience: Previously, insurance used to be offered by agents. However, you may now easily buy term insurance for housewife or for anybody online. Online term plans are 30 to 40% less expensive than their offline counterparts because of less paperwork that completely eliminates the need for agents, intermediaries, etc. All of this significantly reduces the insurance company’s service and distribution charges. This benefit is then passed on to customers, allowing them to purchase a policy online at a low cost with quick processing.
- Tax benefits: Term insurance plans can help you save on taxes, reducing your overall financial tax liability. Section 80C allows you to claim a tax deduction of up to Rs. 1.5 lakhs on the premiums you pay for the term insurance for housewife coverage. In addition, the death benefit paid to your family to help them cover future expenses is tax-free under Section 10(10D). Although this should not be the sole reason for purchasing a policy, it is a sufficient incentive.
While obtaining term insurance plans that are low in price should not be your primary goal, it is worthwhile to consider a term policy that you can get at a reasonable cost and safeguard the financial security of people who rely on you.
How does term insurance work?
So, now that you know what makes term insurance affordable, the question is how does it function?
Assume a policyholder wants to get a significant sum of life insurance for his family at a nominal premium. As a result, s/he purchases a life insurance policy for the amount of Rs. 1 crore with a tenure of 20 years. The insurance company costs him a term insurance premium for his/ her life protection. S/he continues to pay this premium each year for the duration of the plan.
- If the policyholder dies within 20 years, the insurer will pay the nominees a death benefit of Rs. 1 crore.
- If the policyholder survives the 20-year term, no benefits will be given to the nominees.
Things to Consider While Buying Term Plan
Before you select a low premium term plan, make sure you factor in the following aspects so you can acquire suitable coverage:
- Understand your family member’s needs and aspirations to ensure adequate coverage in your absence.
- The term plan’s benefits cover your obligations and responsibilities, relieving your family of financial burdens.
- Check the insurer’s claim settlement ratio; a greater ratio increases the likelihood of your nominees’ claims being settled.
- Consider inflation to calculate the appropriate coverage for your family’s future needs, which may require more to maintain their present lifestyle.
So, we are saying,
At last, Insurance companies provide a term insurance calculator to help the policyholder know the premium amount or their monthly outgo. You may also compare different plan options to find a policy with the benefits you need. Compare other insurance plans available in the market to get one that fits your budget. Still, if you consider term life insurance as an additional expense, consider asking families who have lost their loved ones and received a death benefit payout. Their stories are about survival and how the deceased’s timely financial planning helped them maintain their finances during a time of mourning. They would not consider insurance an expense but rather an ‘investment’.