How a Term Plan Protects You Against Financial Liabilities?

Written by : Knowledge Centre Team

2026-02-26

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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 of a trusted, reliable term insurance plan.

Key Takeaways

Term insurance is essential for protecting your family against unforeseen financial burdens.
It ensures loan repayments, future goals, and daily living expenses are covered.
Add-on riders enhance coverage for critical illness and accidents.
Term insurance offers significant tax benefits under Sections 80C, 80D, and 10(10D).
Start early to get maximum coverage with the lowest premiums.

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, it offers 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.

Also Read - Term Plan Meaning

Protect Your Family with Affordable Term Insurance

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Why Term Insurance is a Modern Necessity

Today’s financial landscape has become increasingly complex. People are balancing EMIs, education loans, car purchases, home mortgages, and more. Moreover, medical inflation and unforeseen health crises only add to this burden.

A term insurance policy helps protect your family’s financial stability in your absence by ensuring that:

EMIs and debts are not left unpaid
Long-term goals like children's education are not compromised
Living standards are maintained

It’s not just about death protection, it’s about giving your family financial continuity in times of emotional turmoil.

Let us look at the primary benefits a term insurance provides with regard to the modern-day complexities.

Protects Against Debt and Obligations:

Over the course of life, individuals tend to make several high-value investments to secure their future. These typically form a significant part of one’s financial portfolio and often include:

Purchasing a home to build long-term assets
Buying a vehicle for everyday transportation
Managing regular household necessities
Saving for children’s or a dependent sibling’s education
Planning for significant life events like weddings

To achieve these milestones, it’s common to rely on some form of credit, such as:

Home or personal loans
Mortgages
Credit cards
Lines of credit

While these obligations are usually factored into long-term financial planning, an untimely demise can derail these arrangements. In such unfortunate circumstances, the responsibility of repaying these debts may fall on your loved ones, adding to their emotional and financial burden.

However, by securing a term insurance plan, you can protect your family from this situation. The death benefit received through the plan offers substantial financial relief, enabling your family to clear these obligations without having to compromise their standard of living or liquidate essential assets.

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).

Protects Against Uncertainties:

Life is unpredictable. While term plans primarily offer death benefits, they can be customised with optional riders to offer even broader coverage.

Common Riders Available:

Critical Illness Rider: Offers a lump sum payout upon diagnosis of a serious illness like cancer, heart attack, etc.
Accidental Death Benefit Rider: Offers an additional payout in case of death due to an accident.
Accidental Total & Permanent Disability Rider: Offers a payout if you suffer permanent disability that prevents employment.
Waiver of Premium Rider: Future premiums are waived in case of critical illness or disability.

Choosing the Right Coverage Amount and Term

Selecting the correct sum assured and policy term is essential. Too little cover might not be sufficient, while too much might be unaffordable.

Things to Consider:

Current and expected future expenses (household, education, health)
Outstanding liabilities
Inflation
Your age and earning years left

A good rule of thumb is to have coverage that is 10-15 times your annual income. If you’re young and healthy, premiums will be lower, making it the best time to buy.

When is the Right Time to Buy Term Insurance?

The earlier, the better. Premiums are lower when you are young and healthy. Delaying your purchase could lead to:

Higher premiums
Exclusions based on medical history
Reduced term options

Buying a term plan early locks in a lower premium and ensures lifelong peace of mind.

Why Choose iSelect Smart360 Term Plan from Canara HSBC Life Insurance?

The iSelect Smart360 Term Plan by Canara HSBC Life Insurance is a comprehensive term insurance solution tailored for modern financial needs.

Key Features:

High coverage at affordable premiums
Flexible policy terms and premium payment options
Coverage for terminal illness and disability
Option to get life cover till age 99 (Whole Life Cover)
Multiple payout options: Lump sum, monthly income, or a combination
Add-on riders for enhanced protection

This plan is perfect for individuals seeking flexibility, affordability, and comprehensive financial coverage for their families.

Final Thoughts

In an ever-evolving world filled with financial uncertainties, securing your loved ones' future should be a top priority. A term insurance plan is not just a policy; it is a long-term commitment to protect your family from debt, lifestyle disruptions, and unforeseen responsibilities in your absence. From safeguarding against liabilities to offering tax efficiency and peace of mind, the benefits of term insurance are both practical and profound.

Choosing the right insurance partner is equally important. We at Canara HSBC Life Insurance, with our strong track record and customer-centric approach, ensure that your journey toward financial security is both seamless and reliable. Whether you're starting your financial journey or strengthening an existing plan, term insurance remains a fundamental pillar in building a resilient financial future.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.