Financial budgeting is crucial for the protection of your and your family’s future. Individuals invest in different ways to secure their loved one’s futures. However, many are unsure or have no idea on how or where to begin? The answer to this is Term Insurance. Term insurance is a beginning point of investment for most people.Read more
Term insurance a type of life insurance policy that provides coverage for the beneficiary’s family in case of pre-mature death for a pre-defined duration. Not only is this one of the most affordable insurance products, but it also has additional benefits attached for the Indian consumer.
To state precisely, term insurance is a form of life cover. In case of death of the beneficiary, the family will receive the sum assured in turn helping the family to remain financially sound and fulfill any family obligation such as loans, children’s education, medical emergencies, etc. No benefit is paid to the beneficiary in case he/she survives the term period. Nevertheless, a beneficiary can purchase a return-of-premium along with their term insurance policy for approximately 20-30 years. In this instance, if the beneficiary expires during the term, the family will receive the sum assured. However, if the beneficiary outlives the term period, the entire amount paid shall be returned to them (without any interest). The added advantage is the amount returned is non- taxable.
A term plan can be bought by any person who has financial dependents. An individual between the age of 18years old - 65 to 69 years old is eligible to buy a term plan for their family, in case of untimely death.
Many people think of term insurance as an income investment, but that is not true. The purpose of purchasing a term insurance policy should not be as an income source but to provide support to your family in case of life uncertainties. The sum assured received by your dependents can be used to reduce their financial hardships in case of your demise.
Enlisted below are 6 advantages of owning a term plan:
Section 80C of the Income Tax Act, 1961, is the most preferred section amongst taxpayers as it provides tax exemption on the premium paid for your term plan. An Indian taxpayer is eligible for a tax deduction of up to 1.5 lakhs per annum on their term insurance policy. This benefit can be availed by an individual (beneficiary), their spouse, and their dependent children.
Certain conditions to avail of the tax deduction:
Income Tax Act, 1961, Section 10D, offers tax exemption on death and maturity claims. Under this section, the Sum Assured that the nominee gets as a death benefit or maturity benefit of the term insurance policy, including accrued bonuses, is tax-exempt. This is applicable even if one gets an amount from a foreign country, apart from India.
Certain conditions to avail of the tax exemption:
Income Tax Act, 1961, Section 80D, offers tax benefits on add-on covers. This means that if your tax insurance policy has an additional rider cover in form of Accidental Total Permanent Disability Rider, Critical Illness Rider, Hospital Care Rider, Joint Spousal Cover, etc. then one can get tax benefits. This benefit can be availed by an individual (beneficiary), their spouse, their dependent children, and their parents either dependent or not.
Certain conditions to avail of the tax benefit:
If an Indian consumer is not happy with the term plan they just purchased, they can refund the amount in the free look period. IRDA has created a provision for such cases known as the free look period. Under this provision, if an individual has bought a term insurance policy and they are not happy with the terms and conditions attached to the same, they can unquestionably return the plan to the respective insurer within a specified duration mentioning their reason to do so along with the original term insurance policy documents and then are subject to a refund.
Within 15 days from the date mentioned in the receipt of the policy documents, a person can opt for a refund. In the case of distance marketing, the specified duration increases by an additional 15 days, making the free look period a total of 30 days from the date mentioned in the receipt of the policy documents. By doing so, the insurance company will generate the refund subject to any kind of deduction corresponding to the risk premium for the cover period, any medical expenses incurred, and stamp duty.
Term Insurance is one of the most efficient ways to secure your loved one’s financial needs but along with the same, it also ensures various tax benefits making it one of the top tax-saving tools. Every individual should be well aware of their tax benefits before making any sort of investments for themselves or their family. Understanding and having complete knowledge about term insurance family aids to your financial well-being so you can make the most of it.
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