Don’t Buy Term Insurance Just to Save Tax, Make Sure It Is the Right Cover for You

Don't Buy Term Insurance Just to Save Tax, Make Sure It Is the Right Cover for You

There are various benefits of term insurance. However, its tax-saving properties are what attract most people first. According to Section 80C falling under the Income Tax Act, 1961, you are allowed a tax deduction up to INR 1.5 lakh on the premium paid towards the term plan. This surely makes it a profitable investment option. However, apart from tax deductions, you need to look at the bigger picture while investing in an online term plan. There is more to a term insurance policy. It provides financial security to your loved ones in case of an unfortunate event.

Along with tax deductions under Section 80C and 10 (10D) of the Income Tax Act, 1961, here are a few other benefits of term life insurance:

  • Huge life cover for an affordable premium to take of your dependents
  • Simple-to-understand policy
  • Multiple options regarding death benefits

To avail of the term plan tax benefit and other advantages, you need to first purchase the ideal insurance plan. Here are a few aspects of it that you must keep in mind:

  • Premium

Term insurance does not have any maturity value. The benefit is paid to a nominee if the policyholder passes away before the tenure of the policy is over. Hence, its premium is lower compared to a general life insurance plan. The premium value depends on factors like the age of the insured, sum assured, and duration of the plan. Compare the premium of different insurance companies and measure it against the benefits to find the most suitable plan for yourself.

  • Do you need it?

Every policyholder asks this one question before buying any insurance plan. There is an idea that only married couples need term insurance to secure the future of their children. However, this idea is completely baseless. The purpose of a term insurance plan is to provide monetary security to those who are financially dependent on you. So, you need it for your parents, spouse, children, or any loved one you want to be taken care of in case of an unfortunate event. If you are unmarried but the only bread earner, you need a term plan to ensure your family’s financial wellbeing when you are not around. Hence, buy the appropriate plan and keep adding covers as your liabilities increase.

  • How much cover you need

This surely is the most important factor to be considered when buying term insurance. You can use an online calculator, which can help you find an amount that would be sufficient for your family in your absence. It is advised that the cover should be at least ten times larger than your yearly income.

  • Tenure

The tenure of a term insurance policy determines the premium value. The tenure completely depends on your needs. In general, the right length of a term plan is the time between when you buy it and the time you retire from your job.

It is easier to compare online term plans to help you find the right policy within a few minutes. Remember that a term insurance plan is an ideal investment instrument to secure your family’s financial future and not just a mere tax-saving tool.

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