One thing that is certain among the several uncertainties of life is death. Despite the emotional trauma of the event, it is necessary to look ahead and ensure that your family is not forced to face financial difficulties after you are gone. The simplest way to safeguard the financial future of your family is by investing in a term plan. Purchasing a term life policy offers you the benefits of a life cover, tax relief, and financial protection for your loved ones.
What is a Term Plan?
A term plan is the most basic variant of a life insurance plan under which an insurance company promises to pay the nominee of a policyholder a predetermined sum in the event of the latter’s death before the expiration of the tenure of the policy. The policyholder has to pay a sum as a premium to avail of the said life cover.
Regular term life insurance policies do not offer any maturity or survival benefits. However, policyholders can opt for a term plan with a return of premium (TROP) that offers the sum of all premiums paid as a maturity benefit.
Here is Why Term Plans are So Popular
There are many reasons why term plans are considered essential prerequisites for disciplined financial behaviour for yourself and a safe financial future for your family. In this context, some of the reasons have been discussed below.
1. Life cover and premium
A term plan enables a policyholder to have adequate life cover at a low premium. An ideal term life policy has a sum assured that is equivalent to ten times the annual earnings of the policyholder.
Furthermore, if you buy a term plan at an early stage in your life, say in your thirties, you will be well placed to enjoy the benefit of a long and substantial life cover at a relatively low rate of premium. Hence you must consider investing in a term plan at an early age.
2. The option of customisation
Saving in a term plan offers you the opportunity to add the features you want to your life insurance policy. With a term plan being the purest form of life insurance, you get to add quite a few add-on policy riders# you need in your life cover..
3. Term plan with returns
If you choose to add the benefit of 'Return on premium' to your term life policy, you can enjoy the assurance of a return on your term plan. The aforementioned feature makes your term plan a combination of insurance and saving. Therefore, if you survive the term of the policy, you will receive some proportion or the entirety of your premium payments and in the event of your passing during the policy term, your nominee shall receive the sum assured as the death benefit.
4. Financial protection for your family
Since a term plan ensures the financial security of your family in the wake of your death, it is a widely used tool across the world. By saving a part of your income in a systematic manner and investing it in a term plan, you can safeguard your family's financial future.
5. Tax benefit
By investing in a term plan, you can enjoy the following tax* benefits under the provisions of the Income Tax * Act, 1961.
- Under Section 80C: tax* deduction upto to ₹1,50,000 on the premium payments for a life insurance policy
- Under Section 10(10D): exemption from tax* on the death benefit received by the nominee of the policyholder
How to Buy a Term Life Policy?
There are several insurance companies in India that sell term life policies, most of which are available online. It is important to note here that there is no such thing as the suitable term insurance plan since the definition of a suitable term plan varies depending upon the financial capability and goals of an individual.
Therefore, you must ascertain your financial goals, including the magnitude of the life cover you want in a term plan and the amount of premium you are willing to pay, before purchasing a term life insurance policy.
After determining your desired life cover and premium obligation, you can browse the features of the term plans on the provider’s website.
Rather than looking for an elusive suitable term insurance plan, you must select a plan that suits your financial goals as well as your budget. Furthermore, you can also add the necessary features to a basic term plan and build a plan with a comprehensive life cover. It is advisable to ensure that your term plan has an adequate life cover which is typically ten times your annual income. Furthermore, the amount and the frequency of the premium payments must be adequate for you.
Sampoorna Rakshakaran with Tata AIA Term Insurance Plans
Tata AIA Life Insurance has a wide selection of term life policies that enable policyholders to include the additional features of their choosing. You can compute the premium of the selected Tata AIA term plan by using a Tata AIA calculator and purchase the said plan if you find it feasible for you.
An investment in a term plan can help you optimise your personal financial strategy, avail tax * benefits, and secure the financial future of your loved ones. Therefore, you must consider buying a term life policy that suits your financial goals and your budget.