When it comes to protecting the future of your loved ones, a life insurance plan is a must. Since there are many policies available in the market, such as endowment plans, unit-linked insurance plans (ULIP), term plans, etc., people often get confused about which one could be the right fit for them.
Many buyers are reluctant to go for term plans because it doesn’t offer any maturity value. Despite this, term plans are highly recommended by experts and offer several other unmatched benefits that make it a smart choice.
Let’s understand why financial planners recommend opting for a term plan and how it’s a smart move while planning your finances.
Term Insurance Plans
A term insurance plan is a simple and affordable insurance plan that offers higher coverage at a lower premium rate. Under this plan, the beneficiary receives sum assured in case of the death of the policyholder during the policy tenure. As mentioned before, there is no maturity benefit offered in term insurance plans.
Let’s look at some of the reasons to consider buying term insurance:
- Financial Security for Dependents: It offers a much-need financial backup for dependents in case of the demise of the insured. The money can be used to address any financial obligations or expenses, thereby helping the dependent family members to lead their normal lives.
- Higher Coverage at Lower Premium Cost: Term plans offer higher coverage at relatively lower premiums. The premiums are fixed throughout the policy term. Since you only have to pay a small amount in premiums, you can use the remaining surplus funds for investments in other schemes that offer good returns or maturity benefits.
- Option of Additional Riders: You can avail of even higher coverage through the available riders offered by insurance companies at an extra cost. These riders generally include coverage for critical illness, accidental death, permanent disabilities, etc.
- Tax Exemptions: Apart from the above benefits, the premium you pay towards the term insurance plan is also eligible for deduction under section 80 C of the Income Tax (IT) Act, 1961. You can claim the maximum deduction of up to ₹1.5 lakh. Hence, while securing your loved ones, it also offers you substantial tax benefits.
The Right Time to Buy a Term Plan
Now is the perfect time to buy a term plan in order to ensure the financial security of your loved ones, i.e. your spouse, children or other members of the family. Various factors such as age, gender, medical conditions, lifestyle, and occupation may affect the premium cost you are paying towards the policy. Hence, it is advisable to buy a term plan early because the premium cost would be low.
