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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+ 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!

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