All the hard work you put into building wealth over time is to ultimately make sure that your family has a stable future and enjoys a good lifestyle. But have you ever thought about what will happen to your family members if you are not around?
Life is extremely uncertain, and you might face certain unfortunate circumstances at any time. Insurance products like term insurance policies are designed to provide a much-needed financial cushion for such situations. Hence, you need to invest in such a policy to secure your family financially in case of an exigency.
Before getting into the reasons for investing in such a policy, you must understand what is a term plan. It is essentially a pure life insurance policy wherein your nominees (usually family members) would get the sum assured as a death benefit if you were to pass away within the policy term. There are also rider options like Return of Premium Rider that offer to return the premium paid to the insured if the latter survives the policy term. Term insurance is among the most affordable insurance instruments available today.
Lets discuss some of the key reasons why you should consider investing in a term life insurance policy:
- High cover at a lower premium: As a pure life cover without any investment component, term insurance plans are very cost-effective. You can avail high life cover for affordable premiums by investing in such a plan at a young age. Buying an online term plan would help you bring down the cost of the policy further, and it is also available from anywhere in the world.
- Avail tax benefits: Term insurance policies can be a part of your tax-saving investments. Under Section 80C of the Income Tax Act, 1961, the premiums paid for your term plan qualify as a deduction from your taxable income up to INR. 1.5 lakhs. Moreover, the lump sum amount received by your family members as the death benefit would be exempted from taxes subject to Section 10 (10D) of the Income Tax Act, 1961. In case you opt for health riders like the critical illness benefit rider as an add-on cover of your term plan, the premium paid for the rider is eligible for tax deduction under Section 80D of the Income Tax Act, 1961.
- Financial stability: The death of a loved one can take both an emotional and financial toll on the surviving family members. Ensuring the financial stability of their family members is the key reason why people invest in a term insurance plan. If you are the breadwinner or even a primary earning member of your family, then your demise can significantly strain your family’s financial condition. Managing household expenses can become quite a difficult task in the absence of your income. The death benefit provided under your term life insurance policy can come as a massive boon under such circumstances and help your family take care of their essential needs.
- Securing the future: All earning members of a family have certain obligations and responsibilities towards their parents, children, and spouse. Term insurance plans allow you to plan ahead and carry out your responsibilities even after your demise. The payment from these policies can be used to make sure that your children get a good education and see to it that your parents and spouse can enjoy a comfortable lifestyle without any financial hardships.
- Protect family assets: It is common to take out loans to fulfil important life goals, such as buying a house or car. However, the loans or debts in your name shall be passed on to your family members after your demise. In the absence of a financial safety net, they may have to sell off their assets, like property, gold jewellery, and more, to repay the debt. However, when you invest in offline and online term plans, the sum assured from the policy can be used to repay these loans and ensure your family’s assets remain intact.
- Add-on riders: In addition to protecting your family members, term life insurance can also provide you with much-needed financial protection through add-on riders. These riders boost the coverage provided and offer financial compensation in case of particular situations. Critical illness benefit rider, for example, shall provide a lump sum payout if you are diagnosed with any of the critical illnesses specified in the policy documents. This payout can be used for your treatment expenses. Moreover, the premiums paid for such riders are also eligible for deduction under Section 80D of the Income Tax Act, 1961.
Now that you know what a term plan is and why to invest in such a policy, there’s no reason to procrastinate on it. Take this responsible step to secure the financial future of your loved ones.