Term Insurance Plans

Yes, term plans offer tax benefits under two different sections of the Income Tax Act. The premiums paid for the upkeep of either yours, your spouse’s or your children’s term insurance plans, up to a maximum of INR 1,50,000 per year, are eligible for tax deductions under Section 80C of the Income-tax Act, 1961 (‘the Act’). Additionally, the death benefit that your nominee receives is also exempt from income tax under Section 10 (10D) of the Act.

As with most insurance policies, it’s always best to buy a term insurance plan when you’re young and in relatively good health. This will allow you to get the best possible cover at an affordable rate. Depending on the term plan you would like to purchase, you need to be at least 18 or 25 years at the time of purchasing the policy and no older than 65.

While purchasing your insurance policy online, you may be required to upload copies of the following documents:

• Age proof (PAN card, voter’s ID card, passport, driving license, school/college leaving certificate, birth certificate)
• Address proof (utility bill, passport, voter’s ID card, telephone bill, ration card, electricity bill, bank account statement, letter from a recognised public authority)
• Photo ID proof (driving license, voter’s ID card, passport, PAN card, AADHAAR card, letter from a recognised public authority with a picture verifying identity and residence)
• A recent passport-sized picture
• Income proof (salary slip, Form 16, ITR/assessment order, employer’s certificate)

The ideal life insurance cover which should be at least 5-10 times your annual income. Simply put, you should have enough life insurance or term insurance cover so that your family can cover the liabilities and manage for at least 5-7 years without your income.

People have enormous faith in the life insurance cover that their employer provides for them. Our research insights tell us that cover provided by the employer typically is equal to the annual income. This isn't adequate. Also, this insurance lasts as long as you are employed with the organization. If you change jobs, start a company of your own or become a freelancer, you won't have the same insurance cover. If these events happen when you are older, the cost of insurance will be higher too. In such cases term insurance policies are advisable.