5 Reasons You Should Invest Your Increment in a Term Plan

Getting a raise or increment at work is undoubtedly the best reason that calls for a celebration. It is a well-deserved recognition of your efforts and a boost to your financial situation. With this additional income, you might be tempted to treat yourself or indulge in some long-awaited purchases. However, it is essential to consider the bigger picture and make wise choices with your newfound financial stability. One of the smartest investments you can make with your increment is in an online term insurance policy.

Term insurance, a type of life insurance, ensures that your loved ones are protected in the unfortunate event of your unexpected passing during the policy period. This amount serves as a substitute for your income, ensuring that your family's financial requirements are met without having to sacrifice their aspirations and dreams.

While it may not seem like the most exciting way to spend your hard-earned money, there are compelling reasons why you should seriously consider investing in a term plan. In this article, we will explore five key reasons why putting your increment into a term insurance plan can be a game-changer for your financial future.

Let’s Understand If You Should Buy Term Insurance

Term insurance is crucial for providing financial protection to those who rely on you for their livelihood and goals. To determine if you require term insurance, the first question to ask yourself is whether you have dependents or significant liabilities. If you do not have dependents who rely on your financial support or don't have substantial debts to worry about, term insurance may not be an immediate necessity. On the contrary, if you have dependents like a spouse, children, or elderly parents, or if you carry outstanding loans, investing in term insurance becomes critical. It ensures that your loved ones will be financially secure in the event of unexpected circumstances.

5 Reasons to Invest Your Increment in Term Insurance

Here are some of the reasons why using your increment for a term plan investment is a wise choice –

It Provides Financial Protection to Your Family

Investing your increment in a term insurance plan is a wise move to provide robust financial protection for your family. In the unfortunate event of your demise during the policy period, the sum assured will replace your income and ensure that your loved ones' future financial needs are met without hampering their dreams and lifestyle. By channelling your increment towards an online term insurance policy, you can strengthen the financial security of your family, giving them the peace of mind they deserve.

It Has Affordable Premiums

The premiums for term insurance are remarkably low, making it a cost-effective option for securing your family’s financial future. By investing your increment in a term plan, you can obtain a higher cover amount at a relatively lower premium. This means you can protect your loved ones' financial well-being without straining your budget. If you are a 30-year-old non-smoking male looking to purchase term insurance with the regular pay option and a policy duration of 30 years, you can opt for the ABSLI DigiShield Plan (UIN: 109N108V11). With this plan, you can get a cover amount of Rs. 1 Crore or more.

It Is Highly Customisable

Term insurance provides you with a multitude of customisation options, allowing you to tailor the policy to perfectly suit your unique needs and those of your family. Some of the customisation options available with term insurance include

• Premium Payment Frequency: You can choose the frequency at which you pay premiums, whether it's monthly, quarterly, half-yearly, or annually.

• Premium Payment Model: You can choose the frequency at which you pay premiums, whether it's monthly, quarterly, half-yearly, or annually.

• Claim Payout Options: Term insurance policies offer different claim payout options. You can opt for a lump-sum payout, monthly instalments over a specified period, or a combination of both.

• Increasing Cover Option: By selecting this option, your cover amount will gradually increase by a predetermined percentage until it reaches a specified limit. It provides added protection against inflation and ensures that your family's financial needs are adequately met.

So, by tailoring the policy to suit your family's specific needs, you gain enhanced control over your term insurance coverage.

It Offers Additional Protection With Riders

In addition to its basic coverage, term insurance provides extra benefits known as riders. By paying a little extra, you can opt for these add-ons without any extra paperwork or medical tests. There are various types of riders available for term insurance policies, such as critical illness rider, accidental death benefit rider, waiver of premium rider, accidental disability rider, and more. These give you or your family extra financial support for specific situations, providing valuable peace of mind.

Dual Tax Advantages

Term insurance offers tax benefits for both the premiums you pay and the claim your family receives, under different sections of the Income Tax Act of India, 1961.

• According to Section 80C of the Income Tax Act of India, 1961, you can receive tax deductions¹ of up to Rs 1,50,000 for the annual premiums you pay for term insurance.
• And, the claim amount your family receives if you pass away during the policy term will be exempt from taxation under Section 10(10D)^ of the Income Tax Act of India, 1961.

To conclude

Investing your increment in a term plan is a wise decision for securing your family’s financial future only if you already have financial dependents, envision them, or have unsettled loans or liabilities. By allocating your additional income towards a term plan, you shield your loved ones from life’s uncertainties, ensuring their dreams and needs are met even in your absence. It is a simple yet effective way to build a brighter future for those you care about most.