Term insurance is one of the most efficient and cost-effective ways to protect your family financially. Unlike other life insurance, term insurance does not generate cash value but provides robust financial security to insured beneficiaries. Read on to learn about term insurance, its benefits, how to choose the right plan, and why it's essential for high earners.
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A pure form of life insurance, term insurance provides life coverage for a specified term. If the insured dies untimely during the coverage period, a pre-decided sum assured will be paid to the designated beneficiaries. However, no payout will be made if the insured survives the term.
The three key features of term insurance include:
Term insurance coverage can range from 10 to 30 years.
The amount paid to the beneficiaries is called the sum assured. It is important to choose the right amount based on individual needs.
Term insurance is ideal for many, as its premiums are less expensive than those of whole life policies.
Let’s take a look at some of the benefits that make term insurance an attractive financial choice for high-income earners:
Premiums for term insurance are relatively less expensive than those for whole life or endowment plans. This means high-income earners can secure a large sum without straining their pockets. Term insurance is, in fact, a smart investment that brings immense peace of mind.
One key benefit of term insurance is its robust financial protection for your loved ones. If you pass away due to an unfortunate event, the benefits ensure your family can maintain their lifestyle, pay off debts in your name, and fulfil their future goals.
Investing in term insurance offers tax benefits that may add value to your financial planning. Under Section 80C of the Income Tax Act, premiums paid for term insurance are eligible for tax deductions, which means you can significantly reduce your taxable income. Not just that, since the sum assured received by the beneficiaries is generally exempt under Section 10(10D), term insurance appears to be a tax-effective investment for securing your family's future.
Most term insurance policies are customisable, so you can adjust your insurance coverage to align with your requirements. You can also add riders like critical illness cover, accidental death benefit, and waiver of premium. These, in turn, come as additional coverages so your family remains protected against different risks and uncertainties.
Here's why it is particularly essential for high-income earners with big financial responsibilities:
Individuals with an annual income of 30-50 lakh live a lifestyle centred on a comfortable house, quality education for children, etc. The dependents would find it hard to sustain this lifestyle in the event of an untimely death of their insured partner. Term insurance helps the dependents maintain this lifestyle by providing for day-to-day expenses and the continuity of the standard of living.
More income means more financial responsibilities, such as home loans and education fees, among other significant costs. These responsibilities can be a considerable burden if the primary earner is no longer around. In such cases, term insurance will cover the family’s financially, allowing them to shoulder their responsibilities without hassle.
A general rule of thumb for term insurance coverage is to aim to buy 10 to 15 times one’s annual income. For example:
The more one earns, the more financial targets and expectations arise, such as saving for children's higher education, investing in that dream home, or preparing for a financially secure retirement. In this planning for the future, term insurance becomes vital. It protects the family's financial future, ensuring that dreams and aspirations can be achieved despite any challenges that may come along life’s path.
When buying a term insurance plan, various factors should be considered based on your needs. Here’s what to keep in mind:
Calculate the amount required by determining what your family needs regarding money. This usually includes debts owed, daily needs, and future goals.
Choose a term that perfectly aligns with your financial responsibilities. A term insurance coverage period should last until your dependents are financially independent.
Ensure that the premium is affordable and that you can pay the premium comfortably.
Determine if flexible options exist to expand coverage or add riders to adapt to your changing needs.
Learn about the insurer's reputation and the quality of the customer service. This can make a world of difference in your insurance experience
Research the insurer's claim settlement ratio before buying a plan. A higher ratio indicates a higher claim settlement.
There are many myths surrounding the term insurance; below are three common myths you must be aware of.
Many believe that term insurance is only relevant for older individuals. However, a term plan at a younger age can secure lower premiums.
There is no payout if one survives the term. However, the primary purpose is to provide financial security for dependents, which is priceless.
Investments are essential but cannot replace the security that term insurance gives your family.
The process of buying term insurance can sometimes be overwhelming. However, knowing your options makes the decision-making process easy. Here are the major steps you should take before buying a term insurance policy :
In general, online purchases get better rates since the operating costs of an insurer are relieved for them. But, an offline buy helps you acquire guidance from agents.
Visit insurance sites to obtain and compare different policies, premium values, and available coverage.
You can seek advice from a financial advisor in choosing the right policy based on your needs and financial situation.
ACKO’s unique term plan, the ACKO Life Flexi Term Plan, delivers a modern, flexible, and customer-centric solution for long-term financial protection. It provides an exceptional level of policy flexibility unmatched by most traditional insurers. The convenience of managing the entire policy lifecycle digitally adds to its appeal, particularly for individuals who prioritise ease of use and adaptability.
With regard to ACKO’s Digital Policy Management System, policyholders can easily make any adjustments (endorsements) such as:
For anyone who earns between 30 to 50 lakhs, term insurance is not just a financial product but an integral part of a sound financial plan. It gives you the peace of mind that if things don't go as planned, your family will be safeguarded financially. Once you understand the importance and options available, you are best placed to make an informed decision that secures your family's future.
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Reviewed by Vaibhav Kumar Kaushik 
Acko Technology & Services Private Limited
#36/5, Hustlehub One East, Somasandrapalya, 27th Main Rd, Sector 2, HSR Layout, Bengaluru, Karnataka 560102
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