For many, the first step to prudent financial planning is having a savings plan. While this may hold true, it only applies for the certainties of life such as education and housing. On the contrary, the uncertainties are complex, how do you peg a value or time to the unknown? Expenses such as medical care or even death are hard to predict or attach a value to the cost that you might incur before you recover. On some occasions, these unforeseen calamities come in multiples, for instance, cases where two parents perish in a road accident leaving their children destitute. Below are reasons why term insurance is essential for any financial plan.
Leave a will not a Bill
Many young couples service home loans, car loans and have credit cards. Often ignored is the fact that liability for the facility does not disappear on the death of the debtor. Creditors will still seek repayment after the death of the primary borrower. Leave your family a will on how to manage the estate and not bills by having a term insurance corpus big enough to summarily cover such costs.
Give your family a regular source of income after your death
especially where you are a sole breadwinner. Term insurance plans are designed to suit the needs of the beneficiaries to the deceased by organizing payments to be either a lump sum amount or regular monthly portions or a combination of both. A term insurance plan, therefore, would provide a steady source of income to maintain your family’s lifestyle in the event of death.
You will enjoy two main tax benefits with term insurance:
All Premiums up to a limit of Rs 1 lakh are exempt from tax granted under section 80C
The Payout from a death claim on a Term Insurance plan is fully tax exempt under section 10(10(d)) of the Income Tax Act.
Term Insurance is not as costly as you thought it to be, it is affordable to most middle-income Indian families. The benefits on the other hand cannot be compared to the cost incurred.
For any prudent parent, it is without any doubt that term insurance would, therefore, top the agenda when planning attributed to the benefits that far outweigh the costs.