An unforeseen circumstance can emotionally and financially devastate your family. If you are the only earning member, the family’s finances may be significantly impacted in your absence.
You cannot predict the future, but you can financially protect your loved ones in an unforeseen event. A term plan is an easy and affordable way to ensure your family members can sustain their lifestyle and meet their financial goals when you are not there for them.
A term insurance policy pays the benefits to your nominees in case of an unfortunate event occurring during the plan’s period. The policy benefits ensure that your family is taken care of in your absence. Typically, you need to renew a term plan annually; however, some insurers offer five-year policies.
About five-year term plans
This type of term insurance provides life cover for five years. Some of these policies offer the option of conversion at the end of the five-year duration. However, ensure that the insurer has included the conversion facility at the time of buying the policy.
A five-year term insurance policy covers you for this period in exchange for a premium. You can either pay a one-time premium or opt for another premium payment term as per your requirements. Your nominees will receive the policy benefits in your absence during this five-year period. However, these policies do not offer any maturity benefits.
Features of five-year term plans
Most of the five-year life insurance term plans offer:
- Policy benefits, which your nominees receive in your absence during the plan’s duration; you determine this value at the time of policy purchase
- Tax benefits on the premium for an amount of up to INR 1.5 lakh per year under Section 80C of the Income Tax Act, 1961
- Additional benefits through riders to avail of comprehensive coverage; some riders available include a waiver of premium, critical illness, and accidental death
- Surrender benefits, which allow you to surrender the policy before its end date
Benefits of five-year term plans
Here are a few plus points of such policies:
- Affordability
A five-year term plan is quite cost-effective. Based on your age and other factors, this type of policy enables you to avail of higher coverage at an economical premium. Additionally, you can select the premium and the payment method as per your financial situation.
- Financial planning
When you opt for an online term plan for five years, you are able to secure future expenses in advance. This ensures your family will not face any financial difficulty in your sudden and unexpected absence.
Who is a five-year term plan suitable for?
You can invest in a five-year term plan if:
- You want life cover for a shorter duration; for example, you may opt for a five-year term plan to meet the repayment of a loan that has the same repayment tenure. If an unfortunate event occurs during this period, the five-year term plan will help in paying the outstanding amount
- You want to insure your business against a key person. If an unforeseen event results in the employee’s demise, the business can temporarily cover some of the expenses with the policy benefits
- You do not have the financial availability to buy a term plan for a longer duration; once your monetary situation improves, you can convert it to a long-term plan
If you are aged between 18 and 65, you are eligible to buy an online term plan for five years. The minimum sum assured (SA) is INR 25 lakh with no maximum limit on the SA. As per your economic condition, you can pay the premium monthly, quarterly, semi-annually, or annually.
Before you buy term insurance, compare the various options and their features to ensure that the chosen policy most appropriately suits your requirements.