A hectic professional life, poor eating habits, and wrong lifestyle-related choices have hampered many people’s well-being. As life is uncertain, providing monetary security to your loved ones should be the first thing on your list while creating a financial plan for the future.To do this, it is advisable to invest in a life insurance plan, particularly a term insurance policy.
A term plan offers a high sum assured that can help your family members to live a financially independent life in case something unfortunate happens to you. Besides this,term insurance in India provides many advantages. Having knowledge of these benefits will help you make an informed investment decision.
Plus points of a term plan
Here are the stand-out features of a term plan:
- Simple to understand
One main reason for the popularity of a term plan is that it is easy to comprehend. A term policy is a pure protection plan, and it does not have any savings or investment component associated with it. You only have to pay the premium to get a term insurance plan.
- Pocket-friendly premium
One of the key highlights of a term plan is that it comes at an affordable premium. As a term plan does not have an investment element attached to it, it comes at a cost-effective premium. Usually, the premium is approximately 0.1% of the sum assured. No other life insurance plan available in the market offers a large sum assured at a nominal premium.
- High sumassured
Another noteworthy term insurance benefitis that it offers a much higher sum assured in comparison to Unit-Linked Insurance Plans (ULIPs) or traditional endowment plans. In the plans mentioned above, the premium is usually around seven to ten percent of the sum assured. For instance, you will get a sum assured of INR 2 lakh if you pay an annual premium of INR 20,000. Such an amount may not be sufficient to help your family meet their expenses and long-term financial aspirations.
Conversely, in the case of a term plan, for an annual premium ranging from INR 10,000 to INR 17,000, you can get life coverage of INR 1 crore. This means that the life coverage offered by a term plan is approximately 60 times more than what an endowment plan or ULIP provides.
- Tax deductions
Tax exemptions are one of the most crucial term insurance benefits. The premium that you pay towards the term plan is tax-deductible under Section 80C of the Income Tax Act, 1961. Here, you can claim a maximum deduction of INR 1.5 lakh per annum. Additionally, the death benefit that your nominee will receive is tax-free as per Section 10(10D) of the Act.
- Fixed premium
The premium that you pay towards your term policy is stagnant throughout the plan’s duration.Moreover, when you invest in a term plan early, you end up paying a much cheaper premium, as your chances of mortality are considerably low as compared to an older policyholder. For instance, if you purchase a term insurance policy when you are in your 30s, you will have to pay approximately INR 10,000 annually for a sumassured of INR 1 crore.However, if you invest in a term plan in your 40s, you will have to shell out around INR 30,000 per year on the premium.So, it is recommended to buy a term plan when you are younger and fix the premium throughout the policy’s period.
The primary purpose of buying a term policy is to safeguard the financial future of your family. Therefore, it is essential to ascertain the sumassured that can help your family lead a peaceful life. Donot take the monetary security of your dear ones for granted. Invest in the right term plan by considering all the features, pros, and cons.