You can never be certain when an unfortunate event strikes and results in your sudden absence. Your family may face severe financial uncertainty in your absence, especially if you are the sole earning member.
One way to procure financial coverage is with a life insurance policy. However, traditional plans like endowment and whole life policies are expensive and you may be unable to get a higher sum assured (SA).
Term insurance provides an excellent alternative. This type of insurance plan pays the benefits to your nominees in case an untoward incident occurs when the plan is active. Several insurers offer additional coverage through riders and allow you to customize the policy based on your needs.
Here are four reasons to include a term policy in your investment portfolio:
- Affordable premium
Firstly, term plans are pure life covers, and the entire premium is used towards mortality coverage. Therefore, the premium on these types of policies is lower when compared to traditional life insurance plans.
The premium depends on several factors, such as your age, lifestyle, and current health conditions. Generally, when you are younger and have no health issues, insurers consider the possibility of any claim to be lesser. As a result, the premium is nominal. Therefore, it is recommended that you buy a term policy when you are young so that you can avail of a higher coverage at an economical cost.
- Financial stability
A term plan’s core objective is to ensure the monetary well-being of your family members if you are not there to take care of them. The insurance company will pay the policy benefits as a lump sum in case of an unfortunate event. Your family can use the money to pay any outstanding debts, such as a home loan or a personal loan.
If you do not have any left behind any financial obligations, these funds can help generate income for your family in your absence. Moreover, your nominees may use these benefits to meet the regular household expenses or to pay for children’s education and their wedding. So, your dear ones may utilize these term insurance benefits as per their requirements in your absence. A term plan ensures your family does not have to compromise on their present lifestyle or face financial distress when you are not around.
- Income tax benefits
The premium paid to avail of a term plan is eligible for tax deductions according to Section 80C of the Income Tax Act, 1961. The maximum limit available under this section is capped at INR 1.5 lakh per annum.
Additionally, the policy benefits received by your nominees are tax-exempt, as per Section 10(10D) of the Act. Also, if you select the critical illness benefit in addition to your basic policy, the extra premium is eligible for a tax exemption according to Section 80D of the Act.
- Additional rider benefits
House Insurance provide enhanced coverage through riders. Some of these include accidental death, income-replacement, critical illness, and waiver of premium. However, before you choose one or more of these riders, remember that these come at an added premium. Therefore, evaluate your and your family’s necessities before finalizing on the essential riders. You may use the online term plan calculator to know more about the premiums associated with different riders. Traditionally, your nominees receive the term insurance benefits if an unforeseen event occurs during the policy term. However, some insurers will return the entire premium if you survive the policy duration through the term insurance return of premium (TROP) plan. Before you opt for this alternative, you consider the supplementary premium and compare the savings on the expense against other investments.
A term plan is a must-have in your investment portfolio to make your family is financially independent in your absence. If you still have not purchased one, it is important to not delay your decision any further and buy a suitable term policy today.