Term insurance is often the right choice for people in their initial family planning years as it will allow them a high amount of coverage when there will be a need for such financial protections. It is also a better option for covering needs that may disappear with time. For instance, paying college fees of your children may be your primary concern which will only diminish as soon as they graduate and start earning their own. It will assure you that your family can survive financially after you. Thus, purchasing term insurance before or during their initial years of school may become the right decision, which can help your children get through graduation if any unforeseen events occur.
Term insurance provides benefits, for a specific period, to the beneficiary in cases of uncertain death of the policyholder. The term period can range between one year to 30 years or similar, as specified by the insurer.
Low Initial Costs
A significant advantage of term insurance is that it has lower initial costs as compared to permanent insurance. It can also be considered amongst the best tax-saving investments. It is cheaper as it only provides death benefits which can be paid as a lump sum amount or in other different payout options. Over time, it can accumulate a significant cash value benefiting your family and helping them in need of the hour during your absence.
Key Policy Provisions
Purchasing an insurance policy is the best-tax saving investment. You must keep in mind its benefits and sum assured while buying a term insurance policy. Some policies have standard provisions where you may be required to add riders to make it comprehensive. You must look for more than just the price factor for policy comparison.
If you’re buying policy offline, ask your insurer about the following:
Accelerated death benefit- under this provision, terminally ill people are allowed to claim a significant portion of their policy while they’re alive.
Premium Waiver- under this, if the policyholder suffers permanent or long-term disability, rest of the premium is waived off by the insurer.
Accidental death benefits- increases the benefits to double or triple the amount, if the policyholder dies by accidental means.
Although purchasing an insurance policy can give your tax-saving benefits, but it shouldn’t be the driving factor as it offers several other considerable benefits. Getting tax-exemptions on claimed amount and premiums are among many other benefits such as financial security to your loved ones, hence, making term insurance one of the best tax-saving investment.
Tax benefits under section 80C
Life insurance premium up to Rs 1.5 lac per annum is exempted from tax, as per section Income Tax Act, section 80C. It is also available for the life insurance amount paid for your children and spouse.
Tax benefits under Section 10 (10D)
According to this act, the sum assured of the policy or the death benefit is fully tax-exempted.