Term insurance plans are one of the most critical components of a comprehensive financial strategy, especially for individuals with dependents. These plans provide a high coverage amount at a relatively low premium, ensuring financial security for your loved ones in the event of your untimely demise. Understanding why term insurance is important can help you make confident and informed financial decisions.
Reasons Why Term Insurance Policies Are Important
Let’s explore the various reasons emphasising the importance of term insurance:
Financial Security for Dependents
The primary reason why term insurance is important is that it offers financial protection to your dependents. In the unfortunate event of the policyholder’s death, the sum assured from a term insurance plan ensures the family can maintain their standard of living and meet critical financial obligations.
Cost-effective Coverage
Term insurance plans are known for their cost-effectiveness when compared to other types of life insurance. They offer substantial coverage amounts at low premium costs, making them accessible to a wide range of individuals. Even those with limited financial means can opt for term insurance and secure their family’s future. You can use a term insurance calculator to get a clear idea of the costs involved and plan your finances accordingly.
Term Insurance Tax Benefits
One of the significant advantages of term insurance plans is the tax benefits they offer. Premiums paid towards term insurance are eligible for deductions under Section 80C of the Income Tax Act, 1961, up to a limit of INR 1.5 lakh per annum. Additionally, the death benefit received by the beneficiaries is tax-free under Section 10(10D).
Customisable Plans
Term insurance plans offer flexibility in terms of policy tenure and sum assured. Additionally, you may also be able to add riders to the plan to enhance the scope.
Safeguard Long-term Goals
Another reason why term insurance is important is that it helps protect your long-term goals, such as children’s education, paying off the home loan, or other major financial responsibilities. Even if you are not around, the payout ensures your family does not have to compromise on those essential milestones.
Importance of Riders in Term Insurance
To understand the importance of term insurance fully, it is important to have clarity on the riders that come with it and their coverage scope:
Accidental Death Benefit Rider
This rider provides an additional payout if the policyholder passes away due to an accident. It boosts the family’s financial cushion by offering extra support during an unexpected tragedy.
Critical Illness Rider
This rider pays a lump sum upon diagnosis of a covered illness. The payout can be used to deal with treatment costs and income loss. It ensures that a major medical emergency does not disrupt your financial stability.
Waiver of Premium Rider
If the policyholder becomes disabled or is diagnosed with a critical illness, this rider waives future premiums while keeping the policy active. With this rider, you can ensure your family receives financial protection during difficult times.
Total and Permanent Disability Rider
If an accident has left the individual such that they are totally and permanently disabled, unable to work or earn income, this rider can come to the rescue. It offers financial compensation to help the policyholder’s family deal with this situation with dignity.
The importance of term life insurance riders cannot be underestimated. They offer an additional layer of protection that standard plans may not cover. They provide peace of mind, reduce financial strain, and allow individuals to customise their coverage based on lifestyle and risk factors.
Understanding what term life insurance is and why a term plan is important is crucial for anyone looking to secure their family’s future. When looking to buy a new policy, using a term insurance calculator can simplify the process of selecting the right term plan. These calculators help you estimate the premium based on your age, coverage amount, policy term, and other factors.
Disclaimer:
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. IndiaFirst Life Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and IndiaFirst Life and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
Under no circumstances, including but not limited to negligence, shall IndiaFirst Life or its directors or employees be liable for any special or consequential damages that are alleged to have resulted from the use and/or inability to use this site or information contained within, even if IndiaFirst Life and/or its employees or directors have been notified of the possibilities of potential damages or losses.
Tax benefits are as per the prevailing Income Tax Laws including the Income Tax Act, 1961 and are subject to change from time to time.
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