Is Buying a Term Plan Beneficial?

As one grows older, the number of financial responsibilities that one shoulders also increases. Whether it is bearing household expenses or dealing with unpredictable health issues, having adequate finances and being prepared regarding one’s funds is important. A vital part of such planning is also taking care of your loved ones’ finances when you may no longer be present. Life is unpredictable. To deal with its uncertainties, one must secure the future of their loved ones by buying a term insurance plan. However, many people are sceptical about such a purchase and wonder whether it offers any significant benefits at all. The truth is that it does. 

The wonderful benefits of term insurance are mentioned below: 

• Provides life cover at an affordable rate 

Term insurance is rightly called the most affordable life insurance plan. The premiums for term insurance plans are quite lower when compared to other kinds of life policies. This is largely because of two reasons. Firstly, it is a pure protection plan. Term insurance is not concerned with market performance and usually has no savings or investment component attached to it. Secondly, it offers coverage for a limited period only. If you pass away during this period, then your family receives the sum assured as mentioned in the policy. 

A term insurance calculator can help you get an idea of the premium you will incur with a term plan. 

• Offers optional maturity benefits 

Many people assume that term plans can have no maturity benefits. However, if you opt for the ‘return of premium’ feature with your policy, then you become eligible to receive a lump sum amount if you outlive the maturity of the policy. If not, your family receives the sum assured. Either way, your money is put to good use. 

• Offers additional coverage in the form of riders

Besides offering a life cover, a term insurance plan also has the option of several add-ons. These riders can increase the financial protection that your term plan provides you to a considerable level. The waiver of premium rider, for instance, waives off the premium till the maturity of the policy if you pass away under conditions specified in the policy. The critical illness rider provides financial compensation if the insured is diagnosed with the illnesses mentioned in the rider. Other riders, such as accidental permanent disability rider and accidental death rider, allow financial aid in the event of a disability or death due to an accident. 

The addition of these riders may lead to a hike in the premium. The term insurance calculator can help you get an idea of that hike as well. 

• Helps you save a good amount of tax 

Term insurance offers an abundance of tax benefits, such as: 

• Tax exemption on the death benefit pay-out as per Section 10(10D) of the ITA, 1961
• Tax exemptions on surrender value pay-out and maturity benefit pay-out
• Tax deduction of up to Rs 1.5 lakhs on the premiums paid towards a term insurance policy as per Section 80C
• Tax deduction on the premium paid towards critical illness insurance rider as per Section 80D

Note that the benefits are valid only if the conditions are met and are subject to amendments in tax laws. 

• Offers various pay-out options 

In many cases, you may not want to provide your dependents with a high lump-sum amount after you pass away. If they are still young, then they may not know how to deal with a large amount of money. In this scenario, you can choose to provide the sum assured to your loved ones in instalments. This ensures that your loved ones have a regular source of income and are not overwhelmed by a lump-sum amount. 

• Peace of mind 

Getting peace of mind is one of the best term insurance benefits. Without a life cover, your loved ones are in a risky situation. If anything, unfortunate happens to you, then they would have very few ways to cope with the lack of finances. Taking care of liabilities would take precedence over pursuing their education and dreams. With the help of a term insurance plan, you are rest assured that your loved ones do not have to see such a day. 

Now that you are aware of the term insurance benefits, you may be considering buying a term plan. Before you sign the insurance contract, remember to read the terms and conditions and get your doubts clarified with the insurer.