Abhinav is always busy with his job and struggles to take control of his finances. Every time the tax planning season comes around, the bank’s Relationship Manager offers him an attractive tax-saving term insurance plan. With this service, Abhinav only needs to sign the required documents, trusting the expert to handle the rest.
He gets a new term insurance policy every year while continuing to pay premium for each plan he purchased on previous years. He isn’t sure of his total coverage, the nature of the policies he’s bought, or how much he pays as a premium. His main understanding is that these plans help him reduce his taxes.
Between January and March, the Indian insurance industry sees a big jump in business. This is when salaried individuals hurry to get tax-saving benefits. In fact, almost half of the yearly sales of insurance companies happen in just these three months.
Sadly, many people, like Abhinav, buy insurance for the tax benefit. While term insurance does offer tax savings, this should not be the only reason to get it.
The Right Way to Approach Term Insurance
The main reason to get term insurance is to protect the financial future of your loved ones against life’s unexpected turns. If something were to happen to you, your term insurance should help with immediate money needs, make up for lost income, and even help with costs like your child’s education or marriage.
Other Benefits of Term Insurance Apart from Tax Savings
- Safety for Your Family: Given the growing number of accidents and severe health issues, life is full of uncertainties. Your family relies on you for everything, so it is essential to make sure they have a stable future with a term insurance plan. The most crucial insurance a family can have is a solid life cover. It ensures your child’s schooling and your spouse’s financial well-being if you are not around.
- Handling Debts: Term insurance does not just look after your family’s financial future; it also handles your debts. It makes sure your family does not have to face debt collectors during hard times. If you have taken loans for a house, car, or personal reasons, the right term insurance will cover these debts, shielding your family.
- Peace of Mind: Unplanned events can mess up your financial planning. With medical costs going up, it is a good idea to have a term plan with health coverage. Expensive medical bills can quickly become a financial burden. A good rule of thumb is to have coverage that is ten times your yearly income, although a deep dive analysis into your finances is required to figure out an appropriate life cover. The primary reason to buy a policy is to live with less stress, knowing that your loved ones will be secure even when you are gone.
Picking the Best Term Plan
So, when you are thinking of buying term insurance, it is crucial to look at all the details and not just get a policy because it offers tax savings.
- Start by figuring out how much coverage you need for now and later. This amount should cover daily life costs, help your family reach financial goals, and clear big debts like loans.
- Term insurance offers extra benefits like coverage for accidental death, lasting disability, or serious illness. Get to know these and add ones that match your life and needs.
- Think about how long you want the insurance. This depends on the premium amount you can afford now and how long you plan to work.
- Also, check if you want coverage for your spouse. Some plans offer coverage for both you and your spouse together, which might cost less than two separate policies.
- Lastly, think about the best way for your family to get the insurance money. Would they need it all at once, in monthly parts, or a mix of both?
Delay Could Be Costly
Only seeing term insurance as a way to save tax causes many young people to ignore its importance. At the beginning of your career, you might fall into a tax bracket that does not require you to pay tax. So, you might not think of buying term insurance early on. But premiums are cheaper when you are young and healthy.
As an experiment, you can utilise an online term insurance premium calculator and check out premium amounts for different age groups. In the future, if your health goes downhill, you will end up having to pay more premium for less life coverage. It is always smarter to get term insurance early. And if you already have insurance, you can always enhance your coverage or buy a new plan in the future if you feel like your requirements are not covered by your current plan.
In Conclusion
Focusing only on tax planning might save you some money now, but it might cost you more later. So, before thinking of saving, make sure your family’s financial future is safe. And if you do not want to spend too much on premiums every month, think about a budget-friendly term insurance option.
A term plan like Zindagi Protect by Edelweiss Tokio Life Insurance offers a safety net for your family without asking for a lot of investment from you. These plans come with choices like different ways to get the payout, built-in coverage, added-on options, more coverage, and extra benefits. Remember, there are many reasons to get term insurance, and the tax benefit is just an added bonus.
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