All of us have different life goals and aspirations that we want to fulfil. Some of them are immediate, some of them are long-term. One thing that is required to fulfil them is money. As a salaried individual, you know that depending on your income alone will not help in accomplishing your goals. You have options such as investments at your disposal, however, they take time to provide you with substantial returns.
Another option would be to go for loans or borrowing money. However, repayment could be problematic for your dependents in your absence. In such situations, having a term life insurance could be quite beneficial. Read more to know how this policy will help you with liabilities.
What is term insurance?
The type of life insurance that provides financial assistance for a specified time period to your loved ones in your absence is known as term life insurance. There are different term periods that you can select under this policy. 10, 15, and 20 years are the most commonly opted term periods by policyholders. The compensation, i.e., the death benefit that is offered by the insurer is paid to your loved ones in the event of your untimely demise during the policy term.
What are the examples of liabilities?
To understand what some of the common financial liabilities are, here are a few examples:
- Taking a home loan
We all want to have a roof of our own on our heads. Due to the higher property rates, it is not feasible for everyone to afford houses easily. While many choose to rent houses, there are many who take a home loan to purchase their dream home. The loan repayment can last anywhere between 15-30 years, depending on the loan amount and the instalments.
- Taking a business loan
Many people aspire to retire early from their jobs and pursue their dreams of starting a business of their own. Depending on savings is not enough and should not be an option. Which is why people opt for a business loan to get a start-up capital and set-up their business.
- Taking a personal loan/debt
People usually take a personal loan if there is a vital or upcoming expense they want to cover. This could include medical procedures, wedding or travel expenses, etc. These expenses can be covered by taking a personal loan.
How does term insurance help with liabilities?
Here is how a term insurance can help you manage your liabilities:
- Pays off your loans and debts
When you borrow a loan, it comes with a major responsibility of having to make timely repayments. Delays in payment of instalments can cause you to pay fines, which would increase the instalment amount. In your presence, the repayment is covered by your income. However, in your absence, this responsibility will fall on the shoulders of your loved ones. It could cause them great suffering if you are the sole earner of the family or if there is not enough corpus to take of the repayments. The financial coverage that is offered under term insurance can help your family with the repayment. When you buy term insurance, you can opt for a higher coverage, which could easily pay off any outstanding loan or debt.
- Creates a corpus for your family
The term insurance cover that is offered can help in securing the financial future of your loved ones. It can help in fulfilling different life goals such as securing your child’s future. Or it could help your partner become financially independent. It can also help in managing the costs of any emergencies that might befall on your loved ones.
- Offers tax benefits
When you buy term insurance, you get to enjoy tax benefits on the premium and the sum assured of the policy. Compared to the old tax regime, where the tax deductions were limited to a premium amount of Rs.1.5 Lakhs under Section 80C of the Income Tax Act; the limit in the new tax regime has been increased to Rs.2.5 Lakhs. The death benefit is also eligible for tax deductions under Section 10(10D) of the Income Tax Act.
If you want to shield your loved ones from financial turmoil and not get burdened by taking care of your liabilities, a term insurance can be beneficial for you. You can take the assistance of the term insurance premium calculator to understand the premium of your policy as per your requirement.