Why is Life Insurance a Must?
Nearly 70 percent respondents of a survey conducted on 1,500 people considered health plan more important than life insurance, says an article published in Policy Mantra in February 2016. Although a health plan is important, it cannot replace life insurance or diminish its importance. Life is unpredictable and can be cut short at any time, both for the young and old alike. Are you the sole breadwinner of the family? If so, then have you ever wondered about the financial challenges that your family might have to face if you are no longer there? Life insurance is the answer to the obstacles your family might face in case of an unfortunate eventuality. It lets you provide financial security to your loved ones even after your death. If you haven’t bought a policy, then buy term insurance today.
Why Should You Choose a Term Plan?
There are five types of policies sold in India: term plans, ULIPs, endowment plans, whole-life and money back policies. Out of this, only a term policy is a pure product, while all other policies are part investment products. Term plans provide higher cover at a lower cost, primarily because the entire premium amount goes towards covering the risk. It has a specific tenure, so you can buy policy according to you need. The share of term policies to total business has doubled to about 5-7% on an average in 2015, according to an article published in The Economic Times in February 2016. Increasing awareness of the benefits of this policy is influencing people to buy term plans.
Provides Financial Assistance
Term cover provides complete assistance for your family’s daily needs. It can help them maintain their standard of living even in your absence. In case of non-availability of adequate funds, your children might not be able to go study in their dream college abroad. The sum assured will help take care of your child’s education and marriage expenses. The inflation rate in India averaged 7.85% from 2012 to 2016, reaching an all time high of 11.16% in November 2013, according statistics released by Ministry of Statistic and Programme Implementation, India. Consistently high inflation rates have pushed up commodity prices considerably in the long-run. Choose a cover keeping in mind your family’s lifestyle and the inflation rate. Ideally, you should buy cover that is 8 to 12 times your annual income. Also, choose the tenure carefully. You can either choose a tenure till your retirement or till you expect your children to become independent.
Pays off Your Debt
The sum assured can also be utilised to pay off loans and debts. Wouldn’t it add to the misery of the family if they get to know that they have to repay your loans and credit card bills while also coping with your loss? Make sure to choose a tenure more than your loan repayment window. Also, choose a cover sufficient to repay your debts, if need be.
You can get tax deductions of up to Rs. 1.5 lakhs on premium payments annually, under Section 80C of the Income Tax Act. This deduction will only be allowed for premiums up to a maximum of 10% of the sum assured for policies issued on and after April 1, 2012. For policies issued before April 1, 2012, the maximum deduction limit is 20% of the sum assured, says an article published in The Economic Times in November 2015. Also, the sum assured is exempt from taxation under section 10 D.
However, above all its benefits, term insurance and term plan gives you the peace of mind that your loved ones would not have to face a cash crunch after you demise. You can opt to buy term insurance online. Online policies tend to 30 to 40 percent cheaper than their offline counterparts.