Are you thinking about purchasing a life insurance policy? While most whole life insurance policies come with extremely high premiums, the much lower premiums of a term life insurance policy can look extremely attractive to you – especially if you are in the early stages of your career. At this point you may not have too many responsibilities, but you expect that they might grow. You may decide to start a family, and want to secure a good future for them. Your standard of living will go up; your financial plan will be undergoing changes as well. In this sense, paying premiums towards a whole life insurance plan may not be something you can make room for in your financial plan. During this period you may want to opt for a term life insurance policy. This will secure your family’s future in the event that something should happen to you, during this transitional period of your life. 

1. What is term life insurance?  

Life insurance policies cover individuals against their untimely demise. In these policies, the insurance company pays the policyholder’s nominee a predetermined sum. Most commonly, nominees are either the parents, spouse or children – the people who are dependent on the income of the policyholder. Term life insurance is a particular type of life insurance policy. As the name suggests, it is taken out for a specific period of time. It offers death benefit to the nominee in the event that the insured person dies, during the period mentioned in the policy.   

2.Advantages of term life insurance:  

1. They offer low premiums and high payout that will be more affordable than whole life insurance policies. 
2. Term insurance policies are significantly easier to understand. This can help you be thorough with the terms of your policy and be prepared for all contingencies.  
3. Premiums paid on term life insurance policies can be claimed as deductions under section 80C when you are filing your ITR. It also gives tax free income if the claim is filed, and paid.  
4. Since most term insurance policies are similar across insurance companies, you can take advantage of the competitive pricing. You may end up paying lower premiums than you expected. 

3.Limitations of term life insurance:  

There is never a free lunch. Just like with anything else in finance, even the many benefits of purchasing a term insurance policy come with certain limitations. They are: 

1. Term life insurance policies do not come with a maturity benefit. You will not receive any refunds if there is no claim during the specified period. 
2. In the course of your policy there will be no contribution towards your income. 

4.Who should consider buying a term insurance policy? 

A term insurance policy is the best fit for individuals at the beginning stages and early transitioning periods of their lives and financial career. This includes people in the age category 25-35, with some spill over. During this time, you may not be certain of your ultimate goals, but will still feel the need to secure the future of your loved ones in the event that something should happen to you. A term insurance policy might offer the best deal in most situations.  

 Having considered these points, you might move forward with your decision to buy a term insurance policy. Consulting a financial advisor will ensure that you identify the right policy for your specific requirements. So set up a meeting with a certified financial planner or wealth management firm now and let them guide you through the steps to secure and safeguard the future of your family.