Life insurance is one of the most crucial investment decisions that you will make in your lifetime. It helps provide financial safety to your loved ones against unfortunate events, such as your untimely demise.
When you invest in term insurance or any other life insurance product, the insurance provider guarantees your family members financial security if something happens to you and you are no longer around to provide for them. However, you need to pay regular premium payments for your policy to remain active throughout the tenure. But most life insurance products are expensive due to the long policy duration. That is why term insurance plans are becoming increasingly popular amongst investors.
Best term insurance can be described as a form of life insurance policy that provides financial cover in the event of the policyholder’s death for a certain period that can vary between 5 and 40 years or longer. In addition, they generally offer smaller and more affordable premium payment options that are easily manageable in the long run for most investors.
Here are some of the benefits of term insurance that makes it a necessary addition to your financial portfolio.
- It offers financial security to your loved ones
The best term insurance will secure your family against financial hardships by paying the lumpsum death benefit in the event of your unfortunate passing. This money can be considered an income replacement that will allow your family to stay afloat in your absence. Your dependents, such as your elderly parents, spouse, and children, will be able to sustain their lifestyle without having to face the financial turmoil that your untimely passing may leave behind. As a policyholder, you can choose how you want the family to receive this benefit – a lump sum or monthly income. Your dependents can use these funds to pay any outstanding debts, fund your child’s education, or bear day-to-day expenses with ease.
- Affordable premiums
Unlike traditional life insurance plans, term insurance offers affordable premiums for expansive coverage. This is mainly due to the shorter tenure of such plans that can be extended through policy renewal only.
- These plans are flexible
Term plans are often considered to be rigid. However, if you choose the right product, you may be able to enjoy some degree of flexibility in the form of increased payouts by accounting for inflation or the return of premiums that are paid to the policyholder as maturity benefit. Some plans may also allow you to generate income throughout your policy duration. By bumping up your premium payments by a little, you will be able to leverage these benefits and expand your term insurance coverage.
- Tax Benefits
Did you know that the premium paid on your term insurance is eligible for tax deduction? According to section 80C of the Income Tax Act, you can claim a tax benefit of up to Rs. 1.5 Lakhs per annum for the premium payments made towards your life insurance plan. Additionally, the death benefit is also exempted from any tax deduction u/s 10D. However, renewing your policies before their expiry is important to continue enjoying the tax savings, as premiums paid on lapsed term insurance plans may not always be claimed under tax deductions.
- Rider benefits
You can also avail additional benefits on your policy by adding riders to your term insurance. Riders are extras that make your policy coverage more comprehensive to include more eventualities, such as permanent disability, accidental death, loss of employment, and critical illness. Be sure to assess the viability of these riders before adding them to your term plan because every rider you add will increase your premium.
When choosing a term insurance plan for your financial portfolio, you must also account for existing liabilities to calculate the precise coverage amount. The policy should be able to adequately cover the current lifestyle and all the expenses of your dependent family members. The general rule of thumb is to opt for at least 15-20 times your current annual income as the sum assured. At the same time, you must also consider your age when looking for a policy. These things can have a direct bearing on your premium amount.
Selecting the right plan will eventually depend on your personal preference and long term goals. Therefore, it is important to carefully assess all the benefits before you make the final investment.
Just as you compare health insurance plans before buying, you need to do the same with term insurance. Assess the plans and their benefits simultaneously to make an objective decision.