Most people’s ideas when talking about wealth creation centre on investing strategies, savings plans, and retirement plans. On the other hand, a term life insurance plan is an indispensable part of any integrated wealth-building strategy. Including it in your financial planning can offer life cover and safeguard your financial journey. Read on to understand why a term plan is crucial to wealth building.
What is a Term Plan?
A term plan is a life insurance policy that offers coverage for a specific period or term. By paying regular premiums, you ensure that your beneficiaries receive a substantial sum in the event of your unfortunate demise during the policy term. What makes term plans particularly attractive is their affordability. The premium rates are always lower than those of alternative life insurance policies, such as whole life or endowment plans, making them an ideal choice.
Financial Protection for Your Family
For individuals focused on wealth accumulation, it is essential to establish financial assurances through investments or other mechanisms to prevent any burden on their loved ones after their passing.
When your efforts to accumulate wealth face a tragic end shortly, without any insurance, your family may need to liquidate their assets, withdraw savings, or source funding from any possible sources to deal with the crisis. This is where the term plan comes in handy to protect your family members. The death benefit can cover daily living expenses, outstanding loans, or other expenses like children’s education. It ensures the protection of your family’s financial condition.
Mitigating Debt and Liabilities
You may have borrowed loans to invest in real estate, the stock market, or fund your business. In this regard, a term plan will cover your maximum loan or liability. Hence, your family will be saved from financial pressure and have a way out to concentrate on their future without fear of losing everything.
A term plan guarantees stability and peace of mind by securing your family’s financial future, even when managing loans and repayments. It allows you to maximise your earning potential and confidently grow your investments.
Other Benefits of Term Life Insurance
Term life insurance policy evaluation becomes easier when you understand all its advantages.
Flexibility: Select a term that fits financial liabilities such as loans or dependents’ education. This flexibility allows your insurance coverage to meet your requirements without unwanted expense.
Simplicity: Simple terms and conditions make such policies simple to administer. It does not include cash value accumulation, market-linked returns, or maturity benefits.
Tax Benefits: Premiums paid for term insurance are tax-deductible under Section 80C of the Income Tax Act. The deduction is available up to ₹1.5 lakh per year under Section 80C. In addition, the death benefit is generally exempt from tax under Section 10(10D).
Rider Options for Additional Coverage: Policyholders can personalise their plans with optional riders like critical illness coverage, accidental death benefit, or premium waiver, ensuring complete coverage.
Quick and Hassle-Free Settlement of Claims: Most companies prioritise quick settlement of claims, ensuring that the beneficiary receives the claim amount without undue delay, facilitating their fulfilment of financial obligations.
Convertible and Renewable Options: Some term plans offer the flexibility to convert into whole-life or endowment plans or allow renewal at the end of the policy term, providing extended coverage as your financial needs evolve.
Conclusion
Term insurance is an important component of wealth-building plans as it offers financial protection to your loved ones. It acts as a solid pillar, providing security to your family from financial loss, covering liabilities, and enabling investments even when you are not around. With a term plan in place, you can confidently pursue high-return investments, knowing your family’s future is secure.
