Term life insurance, also known as pure life insurance, is a type of life insurance that guarantees payment of a stated death benefit if the covered person dies during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the term life insurance policy to terminate.
- Term life insurance guarantees payment of a stated death benefit to the insured’s beneficiaries if the insured person dies during a specified term.
- These policies have no value other than the guaranteed death benefit and feature no savings component as found in a whole Life insurance product.
- Term life premiums are based on a person’s age, health, and life expectancy.
- Depending on the insurance company, it may be possible to turn term life into whole life insurance.
- You can often purchase term life policies that last 10, 15, or2O years.
Benefits of Term Life Insurance
Term life insurance is attractive to young people with children.
Parents may obtain large amounts of coverage for reasonably low costs. Upon the death of a parent, the significant benefit can replace lost income.
These policies are also well-suited for people who temporarily need specific amounts of life insurance.
Navigating the ins and outs of all the different types of life insurance can seem intimidating, especially if you’re buying your first policy. That’s why many shoppers choose term Life insurance. It’s a good fit for most people, particularly young families on a budget looking for temporary coverage.
Here are some advantages to term life insurance:
1. Less expensive
On average, life insurance rates are more affordable for term than whole life insurance because term policies offer coverage for a predetermined time.
2. More flexible
You have many options when choosing how long your term life insurance should last. Typically, you can buy coverage for 1, 5, 10, 15, 20, 25 or 30 years.
3. Good for young families
Because term life covers only a specific period and is gcnerally less expensive than permanent life insurance, it’s a great choice for young families Looking for temporary coverage.
Term life insurance is easy to understand, which makes it simple to shop for and compare life insurance quotes.
Tax Benefits of term Life Insurance
Term insurance plans are of great help when it comes to individuals who are looking to save on tax. Any policyholder of a term insurance is eligible to receive tax benefits as per the Income-tax Act. 1961. Typically, all term insurance policies offer customers tax deductions under Section 80C of the Income-tax Act, 1961. along with further deductions up to an amount of 1.5 lakhs. Policyholders can also avail of exemptions under Section 10(10)D for receiving any amount as part of maturity benefits from their insurance policy.
Deductions and Tax Benefits Under Sections 80C and 80CCC
The following are the tax benefits that policyholders can claim under Section 80C
- Individual assessees as well as HUFs (Hindu Undivided Families) are eligible for tax deductions under this section. For individual assessees, the following persons are eligible to receive tax benefits.
- The individual himself
- The wire or husband of the individual assessee.
- The individual assessee’s children.
- In the case of Hindu Undivided Families, any member who is a part of the family is eligible to receive tax benefits under this section.
- Tax deductions can be claimed on premium up to 20% of the Sum Assured if the premium amount paid for a policy by the assessee over the course of a financial year is more than 20% of the agreed Sum Assured.
- An assessee can claim tax benefits and deductions if the premium he or she has paid is not more than 10% of the actual Sum Assured, if the policy has been issued to the assessee on or post April 1st 2012.
- For any person with a specific ailment or severe disabilities, tax benefits or deductions can be claimed if the premium he or she has paid is not more than 10% of the actual Sum Assured, if the policy has been issued to the assessee on or after April 1st 2012.
- Under Section 80CCE, an assessee can claim tax deductions up to a maximum amount of Rs. 1.5 lakhs under Sections 80C and 80CCC.
Term insurance Tax benefit 80D
Traditionally, Section is reserved only for health insurance policies. If offers a deduction on health insurance policies taken for self, spouse, children, or parents with different deduction limits under different conditions.
However, certain term plans can also avail the tax benefits under Section 80D. Policyholders who have opted for a health-related rider (such as Critical Illness, Surgical Care, Hospital Care Rider) with their term insurance policy, can also avail deductions. Conditions for term insurance benefit 80D include:
- Deductions under Section 80D can be availed for an amount that doesn’t exceed Rs. 25,000.
- If you have taken an insurance policy for your parents, you can avail additional deductions of Rs.25,000.
- II’ your parents are senior citizens; the deduction limit goes up to Rs.50,000.
Conditions for Term Insurance Tax Exemption under Section 10(10D):
- Term plan tax benefit under Section 10(10D) is applicable if the premium is less than 10% per cent of the sum assured or the sum assured is at least 10 times the premium.
- If the payout exceeds Rs. 1,00,000, and the policyholder’s PAN is available to the insurer, a TDS (Tax Deducted at Source) of 1% is applied.
In order to avail all the tax benefits that come with a term plan, Canara HSBC Oriental Bank of Commerce Life Insurance’s iSelect Star Term Plan proves to be a lucrative option. Policyholders can take their pick of the various riders available – Accidental Death Benefit, Accidental Total and Permanent Disability Benefit or even the Child Support Benefit.
They can also customize their payout options and choose to receive their payout in the form of a lump sum, a monthly income or a part lump sum part monthly income. They choose from 3 plan variants, which, each, offer unique benefits like return of premiums, spousal cover and more. Thus, in addition to tax benefits, policyholders can benefit from a whole bunch of advantages by opting for a term plan.