Here's Why Term Insurance Is a Smart Investment
Understanding term insurance
As the name suggests, term policies offer coverage for a specified term. In case of an unfortunate event of death of the policyholder during this period, the beneficiary is entitled to receive the sum assured amount. This amount is decided at the time of purchase of the policy. You may use any online term insurance calculator to determine the sum assured amount.
It is important to note that in case of survival of the policyholder during this term, the plan just matures. No survival or maturity benefit is payable during such an instance.
Term insurance: A smart investment
Many people often buy a term plan as their financial planner advises them to do so. But they fail to understand the importance of purchasing such a type of life insurance policy.
Following are five reasons why purchasing a term plan is highly recommended.
- Offers security against an unfortunate event
Besides being ridden by grief and sorrow, the policyholder's family may be financially burdened in case of an unfortunate death. Buying a term plan provides them the much-needed financial security, and helps them meet their financial obligations quite easily.
- Provides benefits at the lowest price
With a term plan, you may enjoy a high degree of financial protection at the best price. Term plans are the cheapest form of insurance available. This is due to the fact that the entire amount is used to provide life cover, thereby enabling you to enjoy maximum life coverage, while you pay the lowest premium.
- Acts as income replacement
An individual may consider investing in a term plan, if he/she is the sole breadwinner in the family. In case of an untimely death of the policyholder, the sum assured amount acts as an income replacement. This helps the family meet their financial needs and carry on their lifestyle without much hassle.
- Offers additional coverage
You may avail of greater coverage through various riders. Such riders supplement the coverage of the policy at an additional rate. Some of the common term plan riders include permanent or partial disability rider, accidental death rider, waiver of premium rider, and critical illness rider.
- Offers tax benefit
For those looking to reduce their tax liability, term insurance is a highly recommended option. Premiums paid towards the term plan is eligible for tax deduction under Section 80C of the Income Tax Act, 1961 up to a limit of INR 1.5 lakhs. Therefore, you may purchase such a plan for yourself, your spouse, dependent children, and parents and enjoy tax benefits to a great extent.
The above points highlight the reasons for purchasing a term insurance plan. Investing in such a policy is indeed an essential part of financial planning.
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