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Individuals invest for a variety of reasons. While some make investments to meet their child’s future educational goals, others do so to meet their retirement needs. Some individuals invest to seek coverage against uncertainties in life. One of the best ways to protect yourself and your loved ones in case of an unfortunate event such as death is by investing in a term plan.
Understanding term plans
Term insurance plans are policies specifically designed to provide protection against unforeseen circumstances. It is a pure protection plan that offers coverage for a fixed period. In case of an untimely death during the term of the policy, your loved ones are entitled to receive the death benefit. The received amount may be used to meet financial obligations and to live a comfortable life even when you are not around.
Benefits of term plans
Many have a pre-conceived notion that investing in a term plan is not a wise decision. This is not true. Though term plans do not offer any maturity benefit in case you survive the term of the policy, it ensures financial security in case the worse was to happen. Hence, a term plan is one of the best life insurance options that you may consider while developing a financial plan.
To understand the importance of investing in a term plan, take a look at the following four advantages.
1. High sum assured
This is the greatest benefit of a term insurance policy. Insurance providers offer a high level of coverage at lowest premium rates. You may, therefore, choose a sizeable sum assured that will help to meet your family’s lifestyle expenses in your absence.
2. Income replacement
Term plans are a must for those who are the sole breadwinners in the family. As your income will cease to exist in case of an unfortunate death, your family will be financially burdened in your absence. They may find it difficult to make ends meet. A term plan, however, ensures that your family does not have to face such a dilemma. The death benefit provided in a term plan acts as an income replacement, thus offering financial protection to your family.
3. Provision of riders
Most insurance providers offer the option of riders along with term plans. Such riders provide additional coverage at an affordable cost. Some available riders are accidental death benefit rider, critical illness rider, and permanent disability benefit rider, among others. You may compare the various riders and enjoy enhanced coverage based on your needs and requirements.
4. Tax benefit
Premiums paid towards a term plan are eligible for tax benefits under Section 80C of the Income Tax Act, 1961. Besides, such policies also offer tax-free income on the death benefit amount. You may, therefore, invest in a term plan and reduce your tax liability to a great extent.
A term plan has its own benefits. It offers maximum coverage to those looking to protect their loved ones in case of an untimely death. Such a plan provides peace of mind, knowing that your family’s needs would be taken care of when you are no longer around. It is, therefore, important to remember that a term policy is an essential part of a good financial investment plan.