Top Reasons Why Term Insurance is A Must-Have
Mumbai, August 25, 2020
Unfortunate life events cannot be foretold. But you can certainly keep yourself and your family secure financially in the event of your untimely demise. And this can be done with an adequate term insurance plan.
A term insurance policy is known to pay a lump sum amount as the death benefit to the beneficiaries in the event of your death during the policy tenure. While the basic term plan provides death benefits only, many insurers in India offer enhanced coverage with the help of rider benefits.
You can then customise your term insurance plan as per your need and affordability. Ideally, term insurance is the most affordable life insurance product available in the market. Hence, investing in a term plan will not be heavy on your pocket.
Some of the top reasons why you should invest in term insurance are as follows:
As mentioned earlier, term insurance is the most affordable life insurance product in India. That means you can avail a high sum assured at nominal prices. For instance, a Rs 1 crore term insurance plan is available in the market for an annual premium rate of Rs. 7,500.
The term insurance premiums are based on a few factors - age of the applicant, health conditions, and income. Buying a term plan at an early stage will attract low premiums as you are healthy in your 20s. Whereas, your health starts degrading as you grow old and so the term insurance premiums will increase accordingly.
Offers financial security
The primary objective of term insurance is to provide financial security to your loved ones after your death. So, if you have taken any liabilities such as a personal loan or home loan, the repayment won’t cause a financial turmoil in your absence. The amount received as the death benefit can be used to repay the debt.
Also, if there are no debts to repay, it is best to reinvest the amount in a plan that will yield good returns in the future. However, this completely depends on your dependents and how they plan to use the benefit received.
Besides financial security, term insurance also provides tax benefits. The premiums paid towards the policy can be claimed for tax deductions under Section 80C of the old income tax regime.
The amount received by the beneficiaries is tax-free under Section 10(10D) of the Income Tax Act, 1961. Moreover, if you have opted for the critical illness benefit on your term insurance plan, you can claim additional deductions under Section 80D.
To enhance the scope of the policy, insurers in India offer rider benefits on basic term insurance plans. Some of the rider benefits that you can consider buying are as follows -
Critical illness benefit
Return of premium benefit
Accidental death benefit
Waiver of premium benefit
Just know that your basic premiums will increase with each rider benefit you opt. You can use the term plan calculator to determine the premium amount based on your chosen coverage and rider benefits.
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