Planning for a better financial future should be your top priority to live a stress-free life.For this purpose, it is essential to invest a part of your income in different financial instruments to accumulate a corpus for retirement planning, emergency fund, wealth generation, and to meet your life goals. One basic yet most important investment that should be in your financial plan is life insurance. Out of the different types of life insurance policies available, it is advisable to invest in a term life insurance plan to strengthen your financial portfolio.
Why you should invest in a term plan
Term insurance plans have numerous benefits to offer.Therefore, they have become one of the most sought-afterinsurance plans available in the market today. Here are four important reasons why term insurance should be an integral part of your investment portfolio.
The features, benefits, and terms and conditions of a term plan are easy to comprehend. It is because term plans only provide life cover and do not offer any savings or investment component. The premium that you pay towards the term insurance policy provides you life coverage and is not invested in any financialinstrument to help you build a corpus. Therefore, it is simple to understand the terms and conditions of these plans.
- Low premium
One of the best advantages of buying a term insurance plan is that it comes at an economical premium. No other type of life insurance plan offers a substantial sum assured at a budget-friendly rate. Usually, the premium for a term plan is 0.1% of the life cover. However, this cost can differ among insurers. The low premium makes it affordable for you to secure your family’s financial well-being. Additionally, it is recommended to buy an online term insurance plan, as you can get it at a much lower premium in comparison to purchasing it offline via an insurance agent. It is because the cost of underwriting the policy is less, as you are directly buying the policy from the insurer. So, the agent’s commission does not come into the picture.
- High sumassured
Term insurance plans are one of the most popular insurance plans, as they offer a large sum assured at a budget-friendly premium. In the case of Unit-Linked Insurance Plans(ULIPs) or endowment plans, the sum assured is approximately seven to ten percent of the total annual premium. For instance, in these plans, you will get a sum assured of INR 1 lakh if you are paying a yearly premium of INR 10,000. Certainly, this amount will be insufficient for your family members to meet their long-term financial aspirations. However, with aterm insurance policy, your nominees can get a sum assured of INR 1crore for a yearly premium ranging between INR 10,000 to INR 15,000, especially if you are young and do not smoke.
- Tax benefits
An important reason why people invest in a term plan is to save tax. The premium that you pay towards your term plan is tax-exempt under Section 80C of the Income Tax Act, 1961. You can claim a maximum annual deduction of INR 1.5 lakh. Besides this, the death benefit that your nominees will receive is tax-free as per Section 10(10D) of the Act.
In a term plan, the premium remains stagnant throughout the period. Therefore, it is suggested to buy a term policy when you are young, as the premium is quite cost-effective. It is because the chances of mortality are significantly low during this stage of life.So, invest in aterm insurance policy with the right sum assured as soon as possible, and secure your family’s economic future even in your absence.