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How Does A Term Plan Provide Protection Against Liabilities?

How Does A Term Plan Provide Protection Against Liabilities?

Protection Against Liabilities

Amidst the growing unpredictability of recent events, it has become clearer than ever that a financial crisis can come in many forms. Some financial crises can be personal, such as a minor shortfall towards a financial goal. Meanwhile, other financial crises can be global, such as the ones caused by the recent pandemic. In any case, it is vital for every individual and family to be financially prepared for any uncertainties of the future.

In particular, it is important to protect yourself from any and all liabilities that may arise as your responsibilities grow. In the absence of adequate preparation, the burden of such liabilities can fall on your loved ones and make it difficult for them to financially recover from them. To ensure that this never becomes the case for your family or other dependents, it is recommended to avail a trusted, reliable term insurance plan.

What is a Term Plan?

A term insurance plan, also known as a term plan, is a type of life insurance policy that provides coverage to the insured for a specified period of years, namely a ‘term’. The prime advantage of a term insurance plan is that unlike traditional life insurance policies, they offer immense flexibility to the policyholder. Term plans are also often far more economical and financially prudent than traditional life insurance, offering low premiums with high levels of sum assured.

In the event of the untimely demise of the insured, term insurance plans provide a death benefit to the beneficiaries of the insured. Not only does this offer the financial assistance that the family of the insured needs, but it also helps protect them against various forms of liabilities.

Protects Against Debt and Obligations

During the course of your life, you are likely to make a number of high-value investments for your future.

There are certain common purchases that make up the financial portfolio of most individuals. This includes efforts towards purchasing a home, a vehicle for ease of transportation as well as various regular necessities. If you have children or a dependent sibling, you might also be accumulating funds for their education and in the long run, their weddings.

To fulfill such ambitious goals, it is common for people to avail credit in one or the other form. This includes availing various types of loans, paying off mortgages, line of credit and even credit cards. All of such obligations can be planned out and you can factor in paying off these debts in due course of time.

In the unfortunate circumstance of your untimely death, these debt obligations can suddenly fall upon your family members and loved ones. With a term plan, however, you can ensure that your family does not struggle with such leftover debts. A term insurance plan ensures that they receive a substantial amount of financial aid in the form of the death benefit, which can go a long way in relieving them of these financial obligations.

Protects Against Uncertainties

While term insurance plans primarily protect your beneficiaries from the financial repercussions of your untimely demise, there are a number of other uncertainties that can create a financial burden on them as well. Medical crises such as you being afflicted by a disability or a critical illness can also leave them financially drained for years to come, especially if you are the breadwinner.

This is where term plans prove beneficial. They offer optional add-on riders that can enhance your coverage and protect your loved ones from the liabilities created by such unpredictable situations. Term insurance plans come with riders such as Critical Illness covers and Accidental Total and Permanent Disability Benefit, designed to offer support in such moments of crises.

Reduces Tax Liabilities

Apart from protecting your family against liabilities in your absence, a term insurance plan also serves as an efficient tax-saving instrument. In this way, it serves to reduce your tax liabilities both while premium payments are being made towards the term plan as well as during the payout of a death benefit afterwards.

Here are some of the most common tax deductions you can avail with a term insurance plan:

  • Section 80C: This is one of the most common deductions availed by term insurance policyholders in India. As per Section 80C, all premium payments towards your term plan are eligible for deductions of up to 1.5 lakhs in a single financial year. This deduction can be claimed by the policyholder, his or her spouse as well as the policyholder’s children.
  • Section 80D - If you choose to enhance your term insurance plan coverage with an add-on medical-related rider such as a Critical Illness Cover, you can also avail additional deductions under Section 80D.
  • Section 10 (10D) - With a term plan, your loved ones can be protected from tax liabilities even in your absence. The death benefit received by your beneficiaries in the event of your untimely demise is entirely exempted from tax under Section 10 (10D).

Conclusion

Whether you are an individual with no dependents or the sole provider for a family, it is vital that your liabilities, which would fall on your loved ones in your absence, are reduced.

So if you too would like to avail a term insurance plan to protect the financial future of your loved ones, consider availing the iSelect Star Term Plan from Canara HSBC Oriental Bank of Commerce Life Insurance. This term insurance plan provides policyholders with options for enhanced coverage, various add-on covers as well lowers your tax liabilities.

Speak to an insurance specialist now!

Frequently Asked Questions (FAQs) for Term Insurance Plans

A person can only purchase a term insurance plan till the age of 65 years, and they can choose the risk coverage for up to 99 years of age. One can easily buy the best online term plan between the age of 18 to 65 years.

This being a term insurance plan doesn't offer any payout after maturity or expiration date

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 65 years of age. This is a term plan with return of premium option – that means all the premiums paid throughout the tenure will be paid back to you if you outlive the policy.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly when you buy the best term plan in India.

If your key purpose is to give your Family financial protection, go for the best term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan. iSelect Star is a term plan with return of premium option. All the term insurance premium will be paid back to you, if you outlive the policy term.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, the best term insurance plan pays a part of the sum insured to treat your disease.

Term life insurance plan riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance plan riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term insurance policy remains active until the expiration date.
  • Income Rider: This rider in a term insurance plan ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term insurance plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while Buying the Best Term Insurance Plan?

  1. 1. Are you buying a term plan with return of premium?
  2. 2. Amount of premium you have to pay based on your age, habits, education, and monthly income
  3. 3. The total number of benefits covered in the term insurance plan. Do they include benefits that you care about the most?
  4. 4. How to save money on tax if you pay for the term life insurance plan?
  5. 5. Do they offer regular income options?
  6. 6. Can you change the coverage and premium in the future?
  7. 7. Does the claim consider valid if death occurs outside India?
  8. 8. Which kind of death is not covered by a term insurance plan?
  9. 9. Can NRIs take a term insurance plan? If yes, what are the conditions?
  10. 10. Does the term insurance plan have a cash value if you decide to cancel the term insurance policy?
  11. 11. Under what circumstances can a term insurance plan be cancelled?
  12. 12. Can I pay the premiums online or make electronic payments?
  13. 13. What will happen to the term life insurance plan if the life assured starts smoking after purchasing the policy?
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