As we enter the new calendar year, each one of us is reevaluating our investment and insurance choices made previously. To avoid living a year like 2020, it is imperative to have a sound financial plan in place. While life is full of uncertainties, you need to ensure that yours and your family’s future is protected. Talking about financial security in 2021, term insurance is a stepping-stone for people looking to secure their family’s future in their absence.
Sure, we have multiple other general insurance products taking care of each aspect of our life. But have you thought of how your family will cope financially after your death? Who will provide for them in challenging times? Well, the answer to your woes is a term insurance plan.
Term insurance is a life insurance product that primarily secures your family’s financial future in the event of your death. You certainly will be tempted to buy other life insurance products but wait! We have enlisted a few reasons why you should buy term insurance before any other types of life insurance.
- Simple to Understand
Term insurance is the simplest life insurance product available in the market. The policy is simple to understand – you pay your premiums and the insurer covers you for the chosen duration. In case of your sudden demise during the policy term, a lump-sum benefit is given to your loved ones.
The main reason why other investment-related life insurance plans can get confusing for people is due to the risk involved in it. There is no surprise here, as any investment is subject to market risks. However, most life insurance products offer a component of savings as well. Having these additional features in a single policy is definitely a bonus, but it can get overwhelming for people who are new to dealing with insurance and investments.
- Better Prices
Another reason why buying a term insurance plan should be your first step toward financial security is that the policy is affordable. You can secure extensive coverage of up to Rs. 1 Crore in term plan for a nominal rate. Besides, if you want to enhance the scope of your term insurance policy, opt for necessary rider benefits at an additional price.
You can use the term insurance calculator to determine the policy cost based on your desired coverage and add-on benefits.
- Tax Benefit
Much like any other insurance product, term insurance offers several tax benefits. However, what makes the tax benefit of term insurance plans different from other types of life insurance is how effortless the entire process is.
The premium paid towards your term insurance plan can be claimed for deductions under Section 80C of the old income tax regime. While endowment plans do the same, the premium you pay towards the policy is much higher compared to a term plan. The death benefit received by your family is tax-free under Section 10(10D) of the Income Tax Act, 1961. Besides, if you have term insurance with critical illness cover, you can claim additional deductions under Section 80D.
So, if you observe, a term insurance plan is a good deal for someone who is buying insurance for the first time. It is simple to understand, affordable, and provides ample tax benefits.