“Life is inherently risky. There is only one big risk you should avoid at all costs, and that is the risk of doing nothing.” - Denis Waitley
Of Course, life is tricky, unpredictable and certainly always at risk. Securing our near and dear ones is more crucial than anything. How do I manage to give them the same lifestyle, comfortable home, education in case of any mishappenings? However, we do have one shot solution which will take care of most of our worries- “Term Life insurance”. It is widely gaining popularity in India thanks to the easy access to internet services and online products introduced by insurance companies. It will take care of your family's finances in your absence, and it also acts as a tax saving element. (Under section – 80C and 10(10D).
What is term life insurance and why is it a necessity in today's world?
Term life insurance is an insurance that provides coverage or covers your life's risks. These are high life covers with low premium. In short, when a person dies, the death benefit will be paid to the beneficiary in a lump sum or in parts. Moreover, it can be purchased with minimum paperwork and in no time. Most of the insurers have a wide range of plans available that one can choose from depending on one's affordability.
The other day at work, we happened to talk about my friend Adil, who I lost in a train accident. He was a commoner what we fondly call as the “aam admi”. He was the sole earner of his family survived by his parents and two sisters to look after. He came from a middle-class family, with an average monthly income of Rs 40 to 45 thousand. He had never thought of a buying a term policy. What left behind was his house loan of Rs 32 lacs and the tough survival of his family members. People have always recognized that term policies are essential for people with higher income brackets. However, there are wide options for people with lower incomes as well. One does not have to be very rich to buy a term life insurance policy. In this case, he was undoubtedly eligible for a term plan up to Rs 1 crore.
Consequences that Adil's family had to go through for not having a term insurance policy
In Adil's case, his family had to go through the few sufferings.
- Losing the Breadwinner of the family
Since he was the sole earning member of the family, his family was completely dependent on him right from paying electricity bills, daily survival, one of the sister's education and looking after his father's medical expenses. There was very little scope for the life competency.
- Debt of Home Loan
Adil had to pay a loan of Rs 32 lacs, which was highly impossible for his family members to repay in his absence. Thus, the family has to suffer the loss of their loved one on one hand as well the loss of their recently bought house. The debt collectors will not waive off or let go of their house loan, rather the family members will end up losing the house as well.
- Daily Expenses a Liability for your loved ones
In cases like this, it becomes difficult for the family members to sustain their daily living. Imagine life without our basic necessities? (Food, shelter and clothing).
- No peace of mind and emotional vulnerability of family members
The family not only has to go through the emotional loss of their loved ones but also becomes a victim to the day to day financial crisis. A situation like this can land your loved ones in trouble.
Advantages of having a term insurance policy
- Your loved ones are taken care even when you are gone
There is nothing peaceful than seeing a sense of gratification and see your family smile even when you are gone.
In Adil's case, had he planned and taken a term policy for his family, they would have heaved a sigh of relief. Less emotional trauma and a more peaceful life.
- Debt would not be a burden anymore
There's nothing better than a family free of loans and other financial debts. No debt collectors would come for the home loan and other day to day expenses like your electricity bills, house maintenance, water supply, etc. would all be taken care off.
- Will help you in saving tax when you are alive
Yes, the premium you pay on the term insurance policy has a maximum tax benefit of Rs 1.5 lakh under section 80C of the Income Tax Act, 1961.
- Payout (death benefit) is tax-free for the beneficiary
Yes, you guessed it right! The monetary benefit paid after you are gone is also tax-free. Which means your family would get the entire amount without any deductions. Thus reliving you over all your liabilities.
To conclude, term life insurance is rather an investment for a secure future of your near and dear ones. This will surely give you a sight of contentment when you are alive and even when you are gone making it a must rather than a choice.
Recommended Read: Why You Must Buy Term Insurance as a Parent