A term insurance plan is an investment plan, which provides coverage for a specific period and charges a nominal amount as premium. There are no guaranteed maturity benefits or returns at regular intervals. The term plan is a valuable investment and provides for the financial safety and security of your loved ones in case of an untoward incident. Your family will be able to maintain their lifestyle and meet household expenses without having to incur any debt.
How does term insurance work?
You will be able to make a better decision when you understand how term insurance does work. It is a simple insurance policy where you determine a sum assured and pay regular premiums for the same. The premium amount will depend on your age, tenure of the plan, and the sum assured. Over time, the insurance company collects the premium and uses the amount to provide financial security to your family in case of an untoward incident.
Advantages of term insurance
You need to understand that term insurance has value as an investment and it is not an expense at all. Here are a few advantages of a term insurance plan.
- Low premium
An online term insurance plan offers a cover for your life at a low premium amount. You will not have to manage high monthly outflows for the plan, as you can get a comprehensive cover at a low cost.
- Tax benefit
The amount paid as premium for the term insurance plan will be deductible under Section 80C of the Income Tax Act, 1961. This section allows a deduction up to INR 1.5 lakh.
- Simplicity
A term insurance investment is simple and easy to understand. It offers a cover for your life and there are no complicated terms and conditions or hidden costs involved in the policy.
Investing in term life insurance
It is important to remember that a term plan does not provide returns, as it does not function like a moneyback insurance plan. The policy is only a life cover and you will not receive any return on the investment. However, the plan will give you peace of mind and financial security. In case of any unfortunate event, the plan will protect the future of your loved ones.
Irrespective of your age, gender, and profession, it is important to invest in a quality term insurance plan to ensure the financial security and protection of your loved ones. In case of an unforeseen circumstance, your family members will receive the entire sum assured, which they can use to maintain their lifestyle and meet the monthly expenses. A term plan should never be considered as an expense. It is a valuable investment, which you are making for the safety and well- being of your loved ones.
2 responses to “Is Term Insurance an Investment or an Expense?”
Is Term insurance coverage upto retirement age good or bad ?
Term insurance should cover you till you can earn money and your family is dependent on you.