The fast-paced modern lifestyle is stressful. In 2020, the Coronavirus (COVID-19) pandemic reminded the entire world that life is uncertain. If you have not already secured the financial future of your loved ones, it is still not too late to avail of an affordable term plan.
Term plans are pure life insurance policies. In case of any untoward incident resulting in your sudden absence during the policy duration, the insurer pays the benefits to your nominees. This ensures they can sustain their current lifestyle and meet their monetary requirements to accomplish their life goals.
You can also choose other life insurance policies like a unit-linked insurance plan (ULIP), endowment, or money-back plan. However, the premiums for these traditional life insurance policies are much higher than a term plan.
Here are five reasons why you should invest in term insurance this financial year:
1. Shorter tenure
Generally, traditional life plans have longer tenures like 20 or 25 years. In comparison, some term plans are available for 10 years. Such shorter duration term plans are most suitable if you want to cover your liabilities like a home loan or personal loan. If something untoward happens with you during this period, your family can use the term plan benefits to pay the outstanding loan, ensuring they do not face any severe consequences like financial distress.
As term insurance is a pure life coverage plan and pays no maturity benefits, the premium is significantly lower than traditional life insurance policies. Additionally, the premium remains constant during the entire duration of the term plan. Therefore, when you are young, you can avail of a higher sum assured (SA) at a reasonable premium, which does not increase even as you grow older. As a result, you can save a large amount throughout the insurance policy’s tenure. You can use an online term insurance premium calculator to know the approximate amount you will pay for the desired coverage.
3. Higher coverage with riders
Most insurance companies allow you to enhance your policy coverage with optional riders. Some common riders include an accidental death or permanent disability, waiver of premium, and critical illness cover. You can select one or more of these riders at an extra cost as per your and your family’s needs. Contrary to perception, the riders are available at a nominal additional premium. They can be valuable, as they provide you and your loved ones with higher coverage.
4. Tax deductions
This type of life insurance policy offers a lot of term insurance tax benefit. As per Section 80C of the Income Tax Act, 1961, an amount of up to INR 1.5 lakh paid as insurance premium is tax-deductible per year. Additionally, the policy benefits received by your nominees in your absence are tax-free under Section 10(10D) of the Act. You can consult an experienced professional to know more about the term insurance tax benefits.
Insurers ensure that you have a convenient purchasing experience. Firstly, you can opt for monthly, quarterly, semi-annual, or annual premium as per your economic situation. Additionally, in case of any untoward incident resulting in your absence, you can define how your nominees will receive the policy benefits. You can choose a single lump-sum payout or your nominees can receive a portion of the benefits as a one-time payout and the balance as an installment at periodic intervals over a certain period. Several insurers allow you to increase the insurance coverage over the years to match the different financial goals during various life stages, which ensures complete financial security for your family in your untimely absence.
Various insurance companies offer different types of term plans. It is recommended you compare the features and other conditions to make the right choice.