For each and every one of us, passing away is a given. While we may not have any control over our passing away, we can have power over how effectively we plan to provide for our family financially. Having insurance is essential in this situation. A term insurance policy is an easy and cost-effective approach to protect your family. Hence it is important to understand how term insurance works.
Definition of term insurance
The term insurance plans are a type of life insurance that provides coverage for a set time frame. The policy’s nominee will get the death benefit if the policyholder passes away during this time. If the policyholder lives past the insurance term, no benefit will be given to them. The guaranteed renewal feature offered by many term insurance policies, however, enables policyholders to prolong the policy term.
What are the requirements for term insurance eligibility?
There are minimal eligibility restrictions for term insurance products. The majority of plans are accessible to anyone between the ages of 18 and 65, with a maximum maturity age of 85 years. The sum assured is from Rs. 20 lakhs to up to Rs. 1 crore and even higher, and the policy period ranges from 5 years to 50 years.
You require term insurance for the following reasons:
- Your family will be able to meet future financial obligations with the support of the death benefit that term insurance provides. They can afford their regular bills as well as major life events like a wedding or college.
- In order to buy expensive items like homes or cars, people frequently take out loans. Loss of property could occur if the debt is not repaid. With a term insurance plan, you may protect your family in the event of your untimely passing away from such significant debt. With the help of the policy’s insurance, your family can pay off the loans.
Who should purchase term insurance?
The dependences in our lives could grow as time goes on. Some people must provide financially for their parents, their spouse, and their children. In the event of your untimely passing away, it is our duty to ensure their future.
The following individuals ought to buy term insurance:
- You should safeguard your spouse’s future against an unexpected event if you recently got married. If your spouse depends on you financially, it becomes more crucial. Your spouse is protected for the rest of their life with term plans.
- The future security of your children is among the most crucial justifications for purchasing a term insurance policy. If you have children, you ought to think about purchasing a policy. The biggest responsibility in a person’s life may be raising a child. If you experience an unexpected occurrence, like passing away, term insurance will provide your children with financial security.
- Term insurance plans have many term insurance tax benefits, which is why taxpayers should get them. Under Section 80C, the premiums for a term insurance policy are tax deductible. Section 10 (10D) entirely exempts the maturity payments from taxes.
- It is advised to purchase term insurance coverage as soon as possible. People who have just begun their careers might think about buying coverage because the premiums are affordable for new customers. Once a consumer purchases insurance, the amount of the premium does not vary. However, those who wait until they are older to purchase it will have to pay high rates.
- The lives of their dependents should be financially secured by retired people.
Are there riders in term plans?
Yes, a lot of insurance companies now give term plans with add-ons or riders. Accidental Death and Disability, Critical Illness, Surgical Care, and Hospital Care are some of the most well-liked riders. Although the riders somewhat raise the premium, they can significantly expand the scope of the policy’s protection. * Standard T&C Apply.
Are tax deductibles allowable for term insurance premiums?
Yes, tax deductions of up to Rs. 1.5 lakh each financial year are allowed for premiums paid for term insurance plans under Section 80C of the IT Act. When you pay the insurance premiums for your spouse or children in addition to yourself, you are eligible for these term insurance tax benefits.
However, be careful not to choose term insurance as a last-minute investment to reduce your tax liability. Make sure to thoroughly calculate your insurance requirements and choose a level of protection that will, in your opinion, allow your family to meet their costs in the event of your passing.
The tax benefits mentioned in the article may not apply if you opt for the new tax regime since many tax exemptions and deductions have been scrapped within the new regime.
Term insurance plans are essential for everyone, especially if you are the family’s lone provider due to the affordable costs and increased coverage. Make sure you choose an insurance that precisely matches your needs by thoroughly reading the policy specifics to understand how term insurance works.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.
Source: https://www.adityabirlacapital.com/abc-of-money/how-does-a-term-life-insurance-work