Term plans can financially help a family deal with the loss of a loved one on whom they were dependent. But this is often not the primary reason people buy a Term insurance policy in India. Many professionals go for these plans for their tax benefits.
And as the financial year comes to a close and income tax becomes the highlight of many financial planning decisions, you might be considering going for a term plan as well. These plans indeed offer tax benefits, but it’s important to remember that they are essential tools to provide financial protection for your family in the case of your untimely death. While the tax benefits may be a bonus, you should be aware of all the other benefits of Term Plans while purchasing a term insurance plan. It’s important to carefully evaluate your needs and budget to determine the right coverage for you and your family.
What is a Term Life Insurance Plan?
Simply put, a term life insurance plan is an agreement between the policyholder (insured) and the insurance company wherein, in the event of the policyholder’s untimely death, the insurance company pays a predetermined sum to the policyholder’s family. As you shall discover, term insurance plans are important when it comes to long-term financial planning.
It’s crucial to understand that term insurance is the most common type of life insurance plan available, providing your family with complete financial security against the uncertainties of life.
Your family will get life insurance, or the sum promised in accordance with the term insurance plan you purchase in the event of your untimely death within the policy period.
Reasons you should get a Term Life Insurance Plan
As discussed, term life insurance is like a financial shield for your family in your absence. Apart from tax benefits, here are some additional reasons you should consider getting a term life insurance plan:
The high coverage you receive here is a key factor in picking a term life insurance plan. When you get a term plan, you can easily receive a high cover of a few crores. Obtaining such a large coverage level through other types of life insurance can be highly expensive and subject to rejection, but your odds of doing so with term insurance are rather good. Additionally, getting it is a pretty easy process. Once you’ve compared the various policies, you may get term life insurance right away online. This makes it easy and quick for you to appropriately protect your life.
Your family will get life insurance, or the sum assured in accordance with the term insurance plan you purchase in the event of your untimely death within the policy period.
Insurance against liabilities
You could require financial support in your 20s and 30s to achieve specific life goals. To accomplish such ambitions, you could find that you need to take out loans for things like education, a house, a car, etc. Even while it may appear simple to pay off such debts with your reliable salary right now, the obligations could become a hardship for your family in the event of your future absence. Term insurance might help in this situation.
Locking a lower premium
Term life insurance is cost-effective. Term insurance policies cost less than entire life insurance. Furthermore, your rates will be less expensive the earlier you buy term insurance. The likelihood of having worse health often increases with age. Because of this, elderly people are more expensive to insure. This is reflected in the increased rates you would need to pay if you were to buy term insurance at a later age. When enrolling for term insurance beyond the age of 45, you must also have a health examination.
Multiple payout choices
Every family is unique and has varied financial requirements. In light of this, term plans offer a variety of ways to pay out the death benefit following the death of the policyholder. You can decide what is best for your loved ones by evaluating your financial requirements, financial capabilities, and knowledge. For example, you might choose the lump sum benefit, which would pay out the entire amount insured all at once. Alternatively, you might choose the staggered payout, which would be paid out in installments over time. Pick the one that your family would find most valuable.
Protection Against Serious Illness
You could get a serious disease at any time in your life, and the cost of the necessary care could deplete all of your funds. Even if life insurance is the only benefit of term insurance plans, you can add riders or add-ons to your policy to receive critical illness insurance. If your term insurance plan includes optional critical illness coverage, you will be given a lump sum payment upon diagnosis of any critical disease covered by it. Some insurance companies like Edelweiss Tokio Life Insurance also offer the Hospital Cash Benefit rider, which can provide financial support to pay for hospital expenses.
This rider pays out a small percentage of the sum assured per day as a daily allowance, as well as paying out a portion of the sum assured once you are discharged. Not only this but with this rider you can get a minimum of Rs. 1000 and a maximum of Rs. 6000 from the first day of hospitalization under the Daily Cash Benefit. This is independent of actual hospital expenses and will be available throughout your hospitalization duration. Additionally, 1% of your Sum Assured value will be provided to you for every day spent in the ICU. You also receive a lump sum amount equal to 4% of your Sum Assured value post your discharge from the hospital as a Recuperating Benefit.
What tax benefits do you get if you have a term insurance plan?
Your career trajectory will often take off in your 20s and 30s. Higher incomes would undoubtedly result from this, but so would the cost of taxes. To reduce your taxable income, it is crucial that you use tax-saving tools like term insurance early in your life. Under several provisions of the Income Tax Act of 1961, term insurance plans provide numerous tax benefits to policyholders. These include the following:
- Section 80C Deductions – According to Section 80C of the Income Tax Act of 1961, the premiums paid by the life insured are deductible up to Rs. 1.5 lakh.
- Section 10(10D) Exemptions- The death benefit handed out by the insurance company to the policyholder’s nominee (in the event of their untimely death during the policy term) is exempt from taxation under this section.
- Section 80D Deductions – This section allows for deductions of up to Rs. 25,000 if a critical illness rider is included in the term plan and premiums are paid correctly. The deduction can be ₹50,000 if the policyholder is older than 60.
Sooner or later, you will eventually purchase term life insurance because it is a necessary financial product. But why miss out on them if purchasing term insurance early on equates to advantages like enjoying tax savings from the start of your career, coverage for your family earlier, etc.? The cost of the premium is negligible when weighed against the advantages of a term life insurance plan. You can choose to go with Zindagi Plus, a comprehensive term plan by Edelweiss Tokio Life Insurance. In addition to offering a wide choice of riders, it can include your spouse under the same policy, as well as offer discounts in case you opt for a higher sum assured. Do not wait! Choose the ideal term plan for securing your family’s financial future today.