Term Life Insurance

Anyone with financial dependents should buy a Term Insurance Policy. This includes married couples, parents, business people and self-employed, SIP investors, young professionals with dependent parents, and in some cases, even retirees.

Life insurance premiums paid are deductible from taxable income under Section 80C and hence carry a double benefit for taxpayers – protection and tax-saving. The amount (maturity value) received under a term insurance policy is also tax-exempt subject to conditions under Section 10(10D) of the Income Tax Act, 1961. Term Insurance also has among the lowest premiums compared to the different types of insurance policies.

Hence, individuals who derive any of the three significant benefits associated with term insurance should consider buying such policies. The three significant benefits are – life protection, tax-saving and affordable premiums.

• Parents: Parents are generally the sole source of financial support for their children. The needs of children extend from school fees and living expenses to hefty university fees, later on in life. An unfortunate event with a parent can jeopardise their future and deprive children of life’s opportunities. Parents must ensure that this scenario does not come to pass, by purchasing a term insurance policy. This policy will pay out a lump sum and/or income to satisfy their children’s expenses, in the event of any mishap of the parent(s).
• Newly-married couple: Roses, chocolates and movie tickets are great, but here’s a truly long-lasting gift for your spouse – term insurance. This gift will give your spouse more than momentary joy, and it will secure their future. Term Insurance assures the spouse of financial support in case of a mishap with the insured person and should be purchased as soon as possible by married couples.
• Working Women: The women of today are on an equal footing with men, whether it be managing their finances or providing for their family. Today, a family is as dependent on the woman’s income as it is on the man’s. This dependency brings with it the need to financially secure your loved ones in case something happens to you. A Term Insurance plan assures that your parents/spouse/children are financially secured even in your absence. It ensures that your family does not have to compromise on their lifestyle and can continue with the goals you set for them. The term insurance cover amount also helps to take care of any outstanding liabilities like home loan, auto loan, education loan, and more. Not only this, but some term insurance plans also come with the added benefit of a critical illness^ cover that provides a payout if you are diagnosed with a serious illness like breast or cervical cancer.
• Young Professionals: Young professionals are just starting their careers. Many of them are not yet married and have no financial dependents. However this is likely to change in the future as they get married or support their parents/relatives. Such individuals should buy term insurance now rather than wait. This is because once a policy is purchased, the premiums stay the same throughout an individual’s life. On the other hand waiting to buy term insurance in the future can force customers to pay higher premiums because term insurance premiums increase with age.
• Taxpayers: Term Insurance premiums paid are allowed as a deduction from taxable income under Section 80C of the Income Tax Act, 1961. The term insurance payouts on maturity are also exempt from tax subject to conditions under Section 10(10D). Hence taxpayers can use term insurance to reduce their tax burden significantly.
• Self Employed: As a self-employed person, you face many challenges. Unlike salaried individuals, you do not earn a fixed monthly income; you have an uneven source of income that depends on the ups and downs of the market. Plus, you may have also taken a business or personal loan from creditors, banks, or even your family and friends. Hence, buying a term insurance plan to secure your family becomes even more important for you. A term life insurance policy can ensure that your family remains financially secure even in your absence.
• SIP Investors: Investors in mutual fund SIPs (Systematic Investment Plan) invest a fixed amount every month in a mutual fund. The wealth creation in an SIP is driven by a stream of regular instalments which compound over time. However, an unfortunate event of the investor can stop the flow of instalments. Term Insurance can protect the SIP by providing the nominees of the insured person with funds to continue the SIP.
• Retirees: Retired persons need to have term insurance if they have dependent spouses or families. Buying term life insurance can also be a way of leaving an inheritance for their families. This is because, Term Insurance is paid out to nominees in case of any mishap with the insured person. The payment of Term Insurance is also tax-free subject to conditions under Section 10(10D) of the Income Tax Act,1961.