Best friends Dua and Lisha found themselves sipping chai in a quaint café, discussing their plans. Dua, a meticulous financial planner, broached a topic they had never discussed before - term insurance policies.

"Have you ever thought about getting a term insurance policy, Lisha?" asked Dua, stirring her tea thoughtfully.

Lisha looked puzzled, "term insurance? Isn't that just for older people?"

Dua said, “That is a common myth. Let me enlighten you why it is crucial, particularly for us who are young and have our entire lives ahead.”

They listed down benefits –

⮚  Debt protection

Term policy is essential for safeguarding the family members from debts and loans that holders of the policy might have. In the event of the demise of the policyholder, the insurance payout can be utilised to settle outstanding dues, ensuring that financial stress does not fall on the family members. 

⮚  Financial stability and security for family

One of the fundamental purposes of term policy is to offer financial security to the family members of the policyholder on the occasion of their untimely death. This ensures the family stays financially stable and can maintain their living standard without the income of the policyholder. 

⮚  Tax benefits

Holders of the policy can get tax deductions on the premiums paid as per Section 80 C. This characteristic adds a financial incentive to investing in insurance, making it a tax-efficient instrument.

⮚  Affordability

Term insurance plans are known for their affordability. They provide a higher cover amount for considerably low premiums, making them a viable option for distinct individuals. 

⮚  Fixed premium amounts

Most insurance premiums stay fixed throughout the policy term, offering ease and predictability in financial planning. This fixed nature assists holders of the policy budget for the long run without fretting about rising expenditures.

⮚  Riders/add-ons

Add-on coverage options also called riders like accidental death, critical illness and disability riders can be included in the basic insurance policy. These offer enhanced safety and are customised to cater to particular needs and concerns. 

⮚  Flexible payout 

Term insurance provides distinct payout options, involving monthly income, lump sum payments or a blend of both. This flexibility permits beneficiaries to select a payout option that best matches their financial scenarios. 

⮚  Term flexibility

Holders of term policies have the flexibility to select the duration of the insurance coverage. Based on their goals and life stage, they can go for a term that best matches their requirements, whether it be a long-term or short-term plan. 

⮚  Mental peace

Having a term policy offers mental peace, knowing there is financial safety in place for unanticipated situations. It assures holders of the policy that the future of their family is secure. 

⮚  Ease of process

With the advent of digital platforms, the procedure of purchasing and maintaining term policies has become more user-friendly and streamlined. Online platforms facilitate comparison, purchase, and policy management. 

⮚  High sum assured

Term policies usually provide a high sum assured, which infers the beneficiaries can get a considerable amount on the occasion of the policyholder's death. This sum can considerably help in maintaining the lifestyle of the family and meeting future financial goals. 

⮚  Terminal illness benefit

This feature allows for a part of the sum assured to be paid in advance if the policyholder is diagnosed with a terminal illness. This can provide financial support during a critical time, helping cover medical and other expenses.

⮚  Claim settlement ratio

This ratio shows the percentage of claims settled by the insurance company. A high claim ratio shows the insurer's reliability and efficiency in quick claim settlement. 

⮚  Insurer's solvency ratio

The solvency ratio shows the insurance company's financial stability and its potential to meet long-term debts. Selecting an insurance company with a high solvency ratio is essential for ensuring that claims will get honoured.

⮚  Inflation protection

Some insurance plans provide features to safeguard against inflation, such as a rising sum assured. This ensures the advantage amount keeps pace with the inflation and maintains the value over time. 

Their conversation then shifted to the top features to look out for in a term plan -

⮚  Claim settlement ratio

This ratio shows the percentage of insurance claims settled by the insurance company out of the overall claims received. A higher ratio suggests that the insurance company is reliable and has a higher probability of settling your settlement claims without any stress or hassle. 

⮚  Comprehensive cover

A term insurance policy with comprehensive coverage is essential as it should protect against a wide array of eventualities. This involves natural demise, and accidental demise and might even cover demise owing to specific illnesses. The broader the cover, the better the safety net offered to the beneficiaries. It is essential to go through the insurance terms and conditions to understand what is included and what is not on the cover. 

⮚  Premium payment flexibility

This feature permits the holders of the policy to select their premium payment schedule according to their financial convenience. Insurance providers provide distinct options such as annually, semi-annually, quarterly, or monthly. This flexibility assists in managing the cash flow in a better way and ensures the insurance stays active with zero financial burden. 

⮚  Riders

Riders are additional benefit options that can be attached to a basic term plan to enhance coverage. Common riders include critical illness, accidental death, and disability riders. These riders provide additional sums to the nominee in case of specific circumstances, thereby offering a more comprehensive protection.

Dua pulled out her phone and showed Lisha an online term insurance premium calculator. They played around with different scenarios, amazed at how the premiums changed with different inputs.

As the sun set, Lisha had an appreciation for term insurance. "Thanks, Dua, for this eye-opener. I guess it's time I look into getting a policy myself."

Dua smiled, happy to have shared something so valuable. "It is about planning for the unanticipated and ensuring mental peace.”

Their discussion on insurance was not just a casual chit-chat, it was a discussion about a secure and stable financial future.