Picture this. You got through a company that you always wanted to and are fairly settled in life as well, with a spouse and a kid. Since the pay is handsome, you plan to buy a house and a car. It is while investing in such big matters that “IF” comes into the picture. What if anything happens to you, the onus of all the remaining payment and instalments will be completely on your spouse. A term insurance is an ideal product to negate all of those “what if” thoughts.
Buying a term insurance plan provides you with a lot of benefits and the following are some of them.
- Stagnate Your Premiums
The insurance premium for your vehicle will almost certainly rise year on year. However, when you buy a term insurance plan, you get into an agreement with the insurer. According to the agreement, you are liable to pay the same premium amount for the entire term duration. Once you take a look at a term insurance and if you believe that the product fits your requirements, buy one immediately. This way you do not open your payment renewal notifications to surprise.
- Early Bird
Starting early is a phrase that we come across a lot of times. This is even more essential in the case of term insurances. When you opt to buy a term plan early in your life or career, you end up paying a lot less. For an example, a person in his/her mid 20s will end up paying a premium of approximately INR.6000 for a cover of Rs.1 crore. The same person in his/her mid 30s will end up paying about INR.10000 for a similar over. Every year there is a hike of 6% in term insurance premiums which you will pay extra for every year delay in getting the term insurance plan. Employer Term Plan
A lot of individuals do not purchase a term plan due to the fact that their employers provide term plans in some capacity. Though it is good to have feature, it might not enough to suffice your needs. Term plans provided by employers are usually 2x or 3x of your annual income. Whereas, the general rule of thumb states that a term insurance plan should be to the tune of 10x to 20x of your annual income.
If you are someone who likes to use products that are recommended or vouched by others, a term insurance still rules the roost. A term insurance plan, in fact, is one of the most recommended financial products. If you reach out to any financial advisor, they will provide their recommendation of mutual funds, SIPs, annuity plans etc. along with a term plan. While others will help you build a large corpus for your retirement, a term plan will hold your back should anything go wrong.
- Tax Benefit
It should not come as a surprise that you receive tax benefits when you invest in a term life insurance plan. And for individuals who are looking for additional ways to save tax, a term life insurance is an ideal platform. Having said that, one must consider the tax benefits as a by-product of investing in a term life insurance plan.
Tax Savings offered by Term Insurance Plans
A term insurance is an insurance product at the end of the day. This ensures that the policy has tax benefits associated with it almost like a second nature. In fact, a term plan has dual tax benefits. The premium amount that you pay for your term plan is tax deductible under Section 80C. Thus, you get first hand tax savings.
A standard term insurance pays out only in the case of the death of a policy holder. Even in that event, all the proceeds are non-taxable under Section 10(10D). This way, your loved ones do not have to bear any taxation on the sum assured and can rather focus on other things.
How useful are Tax Saving Plans in Term Insurance?
During the beginning of a financial year, you are supposed to declare all of your planned savings for the year. People usually fail to utilize this and end up paying more amount as taxes. Though there is nothing wrong with paying taxes, there are a few avenues by which you can save your tax liability. A term insurance is one of them. You can use the premium amount of your term insurance as a tax saving instrument.
Whether or not you buy it for its tax benefits, a term insurance should be on your radar for its benefits alone.