Life insurance is the surest way to ensure that your loved ones are well taken care of in the event of your demise. However, with the growing expenses in this economy, it can be difficult to choose a desirable plan despite the benefits. That is why term life insurance policies are gaining intense recognition in this market.
What is term life insurance?
Term insurance is a form of life insurance policy that is available for affordable premium rates and comes with flexible components as compared to other types of policies.
Term life insurance is usually available for as short as 10 years and as long as 100 years, although the latter makes it a whole life insurance. These plans offer high sum assured and the premiums are considerably lower than most life insurance plans.
Term insurance policies are available in different types. Based on the purpose they serve, aside from paying death benefits to assure financial stability for your loved ones, they are sub-divided as follows:
Increasing term insurance –
These are the best term life insurance plans if you are concerned about the inflation rate. The sum assured increases annually, which makes the total amount more than what you opted for. This amount helps negate the effects of inflation on the value of the death benefit.
Decreasing term insurance –
These are the best term life insurance plans if you have liabilities. The sum assured decreases annually, but the difference helps repay lenders and reduce your debts and mortgages.
Level term insurance –
These are standard term insurance plans with no changes applicable during the policy tenure.
Single premium term insurance –
These policies are available if you can pay a lump sum one-time premium to make the purchase. These are the best term life insurance policies if you have an unstable income.
Term insurance with return of premium –
These policies pay you back the premiums that you invested over the years if you survive the policy tenure.
You can choose the best term life insurance that most benefits you and your loved ones. Since different plans offer different benefits, you need to evaluate the needs of your loved ones as well as your financial obligations to make an informed decision.
How do you choose the best term life insurance?
There are a few factors to take into account when choosing the best term life insurance, which are as follows:
Consider the income vs expense ratio. You will need to factor in the monthly expenses towards necessities, as well as emergency funds for medical expenses.
Evaluate the rate of inflation. While it is difficult to deduce, inflation will impact the value of the sum assured paid as a death benefit.
Your family’s life goals will require additional corpus. If you have children or a family business, you need to take the expenses related to these factors into account when choosing both the type of term insurance and the coverage.
Examine the need for riders. Term insurance plans allow you to add riders such as accidental death cover, critical illness cover, and other such add-ons. These riders improve the overall coverage by reducing the financial liabilities of your loved ones during critical times.
Calculate the total liabilities. In the event of your demise, your loved ones will need to repay all the debts and loans.
You must carefully consider the sum assured when choosing the best term life insurance plan. It should suffice to cover all necessities and expenses for different life stages, set up a corpus for emergencies, and afford to pay liabilities.
What are the term insurance tax benefits?
Term life insurance policies are extremely affordable plans with a high sum assured. But that is not their only financial benefit. Term insurance tax benefits also contribute to their popularity. Here are the term insurance tax benefits you need to know:
Under the Indian Income Tax Act, Section 80C, the premium you pay towards your term insurance is eligible for exemption if:
The annual premium is less than INR 1.5 lakhs.
The annual premium is less than 10% of the sum assured.
Under Section 80D, the premium paid towards riders included in your term insurance is eligible for term insurance tax benefits if:
The total premium for riders is less than INR 25,000 for those below the age of 60.
The total premium is equal to or less than INR 50,000 for those above the age of 60.
Under Section 10(10D), the maturity benefit and death benefit from the term insurance policy are exempted from taxes as long as the annual premiums are less than 10% of the sum assured or less than INR 2.5 lakhs each year.
These term insurance benefits ensure that not only can you secure the future of those you love but you also save money while doing so.
