Invest in term life insurance for financial security, not only for tax benefits
Term Insurance Policy is quite a common term in the insurance sector, and almost everyone knows about it. Needless to say, that majority of the individuals in India do invest in it but perhaps for the wrong reason.
Their purchase behaviour is usually influenced by realistic factors rather than emotional. For instance, you will find that almost 9 out of 10 people have invested in term insurance but surprisingly not for securing future financially, rather for tax saving purpose. Due to the fact that the premiums of a term insurance policy are eligible for tax benefit under section 80 C of the Income Tax Act of India. You can claim up to Rs 1.5 lakh every year for the premiums paid towards your policy or for your spouse or children’s policy. This is the main reason why term life insurance in India is seen as a tax-saving product and not as a long-term financial benefit tool.
Also, for this factor, you must have noticed that the last quarter of the year (January to March) remains the most-busiest time and witness the maximum transaction (almost 70 percent). Because during that time, people rush to buy term insurance policies to present the tax-saving documents. And in the process of doing it, people usually end up buying expensive term insurance policies that they might not require.
However, tax saving should not be the only factor to buy a term insurance policy. The reason being a term policy is a pure protection plan. It provides financial security to the policyholder’s family in case of his or her untimely demise in the form of death benefit or the insurance coverage amount. You can also enhance your coverage by adding riders to cover you during unprecedented situations like accidental death or disability, loss of income or critical illness amongst others.
Now let’s understand why it is not viable to consider term insurance as a tax-saving tool but a product for future financial protection.
Tax saving should not be the primary objective: The main aim of the term life insurance is not saving tax; instead, it is a protection for your family against uncertainty. Term Insurance act as a replacement of income for the family in case of the policyholder’s demise. It offers financial security if the policyholder’s dies and also provides coverage against disability and critical ailments. Experts also suggest that investing in term insurance is necessary even before planning your other investments and long-term financial goals. So that when you are not there, your loved ones do not have to struggle to manage their daily expenses. With the help of the life coverage amount, they can even handle your outstanding liabilities or debts in your absence.
Enhanced life coverage: In term life insurance, you can enhance the coverage by adding riders to your base policy. There are various riders offered by insurance providers. Through such riders, you can get extra coverage for challenging scenarios like critical illness, accidental death and more. These riders provide additional financial assistance to the policyholders during challenging times, such as on being diagnosed with a severe disease like cancer. And further protect their savings from draining into medical expenses. Other riders like permanent and partial disability provide monthly payout or lump-sum payout in case of disability due to some mishap. However, the amount that the insured receives ultimately depends on the severity of the disability. The policyholders get the full sum assured in case of total disability whereas in case of partial disability, then the insured receives the partial sum assured amount.
Therefore, if you are also planning to invest in term insurance just to save taxes, you might be going the wrong way. Term life insurance is such a product that does offer tax benefits, but primarily it safeguards your family’s future financially in your absence. So, it is important that you buy term insurance for the right reason. You can visit BimaKaro.in to get a quote for term plans from the top insurers in India, compare and then choose the right one for yourself and your family.