Increasing lifestyle inflation necessitates careful financial planning that can cut back on unnecessary spending, create wealth, and help you save enough for significant life events like your children’s schooling and retirement. Therefore, purchasing a term plan as soon as you start earning should be one of the top items on your financial to-do list.
It provides your family with a solid safety net to cover their bills and maintain their existing standard of living even while you are away. Here are some further justifications for including term insurance in your financial plan:
- Reasonable premiums:
A term plan is only insurance; there is no investing component. Therefore, it is the most affordable option for life insurance. This indicates that you can purchase insurance at reasonable prices for an enormous sum assured that provides additional protection for your dependents and removes future danger. In addition, the premium for a term policy will be less expensive the earlier you buy one. On average, only 1% of a person’s annual income is used to purchase term insurance for the rest of his or her life.
- Financial stability:
Suppose you are the sole wage earner in the family. In that case, your absence may leave them financially vulnerable, particularly if you had taken on additional debt like a loan or mortgage while still alive. However, you can have peace of mind knowing that your loved ones will be financially secure and able to pursue their ambitions thanks to a term plan.
You can tailor the policy to your family’s needs by including riders to cover any additional dangers you may foresee, not just financial but other health-related too. When added to an existing term plan, riders like critical illness benefits, accidental death benefits, and partial or whole disability benefits cost a small sum but offer a greater level of coverage.
- Tax advantages:
The majority of salaried people try to invest in securities that offer both higher returns and tax savings in order to save more money in tight financial conditions. Their financial planning includes this as a critical component. The amount given to your beneficiaries as a death benefit is eligible for exemption under Section 10 in addition to a tax deduction of up to 1.5 lakh on premium payments for term policy maintenance under Section 80C. (10D). Additionally, choosing a health-related rider can allow you to be eligible for additional deductions under Section 80D of the Income Tax Act (for example, a critical illness rider).
You can modify your term insurance plan to meet the specific demands and objectives of your family as well as your own in case of tight financial status. Depending on your demands, you can choose between three different forms of coverage: (a) level, (b) growing coverage, and (c) decreasing coverage. In addition, you have several possibilities for payout:
- A lump sum payment
- A portion as a lump sum
- A portion as a monthly income payout
When purchasing a term plan, keep in mind to disclose any health issues, lifestyle diseases, and habits in full order to prevent your claim from being denied. Without a pure life insurance policy that minimizes risk, aids in your readiness for future uncertainties, and is also affordable, your financial preparation for the future will fall short.