It is frequently questioned whether term insurance is an investment or an expense. Many individuals consider it an expense because it is a non-essential expense and believes that it provides no further value. They believe the same amount can be invested in other investment avenues and one can still be able to earn more than an insurance plan will yield.
However, the main point one misses amidst this is that insurance plan whether one gets the ULIP or term insurance, help to guarantee our future. A term insurance plan is a form of life insurance policy that offers coverage for a certain period or ‘term’. In the event that the insured individual unfortunately dies during the set time period, the insurance company pays a predetermined sum of money to the insured’s beneficiaries.
What is term insurance?
Term life insurance is affordable, and you can benefit from a large sum assured for a reasonable premium. Term insurance policies usually do not provide maturity benefits for the premiums you pay at the end of the term. However, several new term insurance plans have a premium refund option. Investing in these allows you to get the whole premium amount as a reimbursement when the policy matures.
Reasons, why experts consider term plans the “it” investment, are as follows:
Term insurance policies are one of the most basic financial needs, particularly for a single-earner family member. It also provides a variety of features and benefits, including low premiums and riders for extra coverage.
Comes with affordable premium: A term insurance policy might provide
you with a large sum assured and that too at reasonable premium rates when compared to other forms of life insurance plans. Premium payments are made on a monthly, quarterly, biannual, or annual basis. The earlier you obtain a term insurance plan, the lower your premium will be.
Can choose the higher sum assured: If the insured individual unfortunately passes away or is involved in an unfortunate accident, the Sum assured will be paid to the family members. Policyholders have the option of receiving this payout in the form of a lump sum or as a recurring income receivable. It will assist in meeting dependents’ financial demands, as well as household expenses and other living costs.
Policy Premium Payment: If the investor unfortunately passes away before paying all of the premiums, their dependents may be responsible for the entire amount. However, depending on the policy terms, the insurance company may waive the remaining premium payments.
Tax Benefits: Term insurance is the most cost-effective method of tax savings. The premium payments are tax-free under Section 80C of the Income Tax Act, while offering the benefit of a high sum assured. As a result, this term insurance might help you save a significant amount of money on income taxes. However, tax benefits are determined by the Income Tax Act of 1961 and are subject to change from time to time. Via the mobile app, you can a lot about tax dedications on your term insurance.
Return of Premium Option: A basic term insurance policy only offers life coverage to the beneficiary in case of the life insured’s untimely death. It does not provide any maturity benefits; however, as previously stated, you can receive a maturity benefit under the return of premium option. Although this option comes with a higher premium. Another advantage of term plans is that the premium repayment amount is tax-free, as are all repayments.
Can add Critical illness coverage: People can suffer from serious illnesses at any given period. Once you are diagnosed, the treatment cost of a major critical illness can deplete your life savings in an instant. If you add the critical illness rider with your term life insurance plan, you will be able to get the coverage. It will provide financial assistance in the event that you are diagnosed with a serious illness throughout the course of the plan. Term life insurance come with other kinds of riders as well that one can check on their respective mobile app and select the one suitable to you.
Comes with simple Terms & Conditions: When purchasing term life insurance, you may find it difficult to understand the insurance-specific jargon of various policies. Hence, it is suggested to use the mobile app to buy the term plan as there you would be able to understand the meaning of those terms easily which will help you make an informed decision.
Fixed deposit vs term insurance policy: A fixed deposit may appear to be an attractive option at the moment. However, the maturity amount, which appears big at the time, will not be the same value in a decade. Inflation is not taken into account while making fixed deposits. Term insurance, on the other hand, promises a large sum assured for a reasonable premium you make.
The unpredictability of the future: It may be pessimistic to assume that you are going to be no more within the next several years. However, it is not practical. It is a real possibility, and if it occurs, your family will be relieved of at least one source of anxiety, which is financial. It is only appropriate to ensure that they feel stable and at peace and a term insurance plan can help them feel so.
So at last,
Many people combine investment and insurance. However, one must view insurance as a financial safety net for your family, not a tax-saving investment tool. Tax savings are just one aspect of term insurance. You need to ensure that your want of saving money should not make you fall for inadequate coverage which will later create trouble for your family at the time of your unfortunate demise. At last, one should understand having term insurance is necessary. They assist your family in reducing the financial stress they may suffer in your absence. Given all of these benefits, term insurance plans are more of an investment than an expense.