Term Life Insurance: Integral part of your financial plan
Financial planning is nothing but the process of achieving your financial objectives by managing your money in the right way. It includes but is not limited to, emergency planning, risk planning, investment planning, retirement planning, and wealth creation. Having said that, the term plan is important to make your financial plan more robust. With increasing age and responsibility, it becomes crucial to protect your loved ones. And for that, you should have a term life insurance plan in place. Some of the benefits of having a term insurance plan are listed below:
A term insurance plan is the plain-vanilla life insurance product that focusses on risk protection rather than investment. It’s this attribute, which makes it simple to understand. Term insurance simply protects the insured family financially, if the insured person dies during the policy tenure.
If you look at the premiums charged by the insurance company on traditional life insurance policies, such as endowment or money back, you can see that the term life insurance plans are way cheaper. In fact, the premium rates of the term plans are the lowest. They are as low as 0.1 per cent of the total sum assured or death benefit, depending upon the insurance company.
Term plans are known for providing higher coverage at a very cheap rate. Say, for instance, if you are a 30-year old non-smoker male, then the premium for Rs 1 crore death benefit comes around Rs 1,200 per month whereas, the total death benefit for a traditional endowment or ULIP policies is close to 7 per cent to 10 per cent of the yearly premium. Hence, the coverage provided by term insurance plans is 60 times higher than traditional life insurance policies.
A term life insurance policy is also eligible for deduction under section 80C of the Income Tax Act. Though the maximum limit of section 80C is Rs 1.5 lakh, you get certain deductions on the actual premium paid with a ceiling of Rs 1.5 lakh. Further, if you purchase a term return of the premium plan, then you can claim tax exemption on the maturity proceeds under section 10 (10D) of the Income Tax Act. Having said that, we are big fans of the term return of premium plan or even a whole life policy for that matter.