Term insurance is one of the basic requirements of all to ensure financial security to family members. The death benefits received from the insurance can be used to meet any substantial expense, and save taxes. Read on to know more about the tax implication of term insurance.
A type of life insurance, term insurance offers a death benefit to the family if the policyholder dies during the term. It is an essential investment for all to secure their family’s future in case of an unforeseen demise. The policyholder must pay premiums to get this benefit.
Some of the benefits of life insurance are-
Premiums
Purchasing term insurance is not expensive. Since the term insurance is a pure protection policy, the premium amount of the policy is affordable. The insurer offers a high cover for life in case of unforeseen demise of the policyholder. However, it is suggested to buy insurance at a young age.
High Sum Assured
The sum assured that the insurer offers is high. It can help the policyholder’s family to meet all the financial needs after the demise of earner of the house. The insurer offers a lump sum amount, monthly payouts, or a small lump sum amount and monthly payouts.
Cover for Critical Illness
A policyholder can even purchase a critical illness cover plan. If the policyholder suffers from a critical illness covered in the plan, then the insurer must pay a lump sum amount.
Tax Benefit
One of the benefits that term insurance offers the policyholder is the death benefit. In case of the death of the policyholder, the insurer pays the family a sum assured. Many don’t know the other benefits that term insurance offers. Tax benefit is one of them. Buying term insurance can help in saving taxes. It helps the policyholder to secure their family and save taxes at the same time.
Here are the tax benefits that term insurance offers
- Section 80C
You can get a tax exemption of up to Rs. 1.5 Lakh under Section 80C. Even your spouse or children’s premiums is allowed for an exemption. A tax deduction of 10% is offered on the sum assured to the insurance policies. If the person has an ailment under Section 80DDB or disability under Section 80U, then they receive a 15% tax deduction.
- Section 10(10D)
Under Section 10(10D), you can even save tax on the policy’s returns. The death benefit or the maturity amount received gets complete tax exemption. Your family will get a complete death benefit without having to pay any tax. Hence, your family can get tax-free financial help. Term insurance helps in securing your family and saving your money.
While tax benefit is an important factor in buying a policy, term insurance should be purchased to secure your family. Term insurance offers a death benefit, high sum assured, etc. which should be the main reasons why you should buy it. In the event of your demise during the term, your family will be protected from financial hardships with term insurance.