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Why Should You Include Term Insurance in Your Investment Portfolio?

Creating a diversified investment portfolio is one of the best ways to build a secured financial future. However, the uncertainties in life, such as the breadwinner of the family meeting an unfortunate accident, can often throw some of the best investment planning off the track.

Therefore, term insurance plans can be crucial for any investment portfolio so that the family can have a fallback option in the absence of the sole earner.

Term Insurance

Term insurance is the simplest form of life insurance where you pay the insurance premium at a fixed rate for a pre-defined period and get insurance coverage in return. Your nominee will get the payout as per the policy terms if something happens to you during the policy term.

There are usually no survival benefits if you outlive the policy term. However, some term insurance plans provide the return of premium option where they refund the premium to the surviving policyholder after the plan expires.

Benefits of Term Insurance

  • High Coverage at Low Premiums

Term plans offer high insurance coverage at a significantly lower premium than traditional life insurance. Therefore, term plans are ideal for individuals who can’t afford high premiums but want to purchase adequate insurance coverage for their families.

You can further reduce the premium amount if you buy a term plan early in your life. Term plans demand less premium from a young person as health risks are relatively low at a young age.

  • Critical Illness Cover

With a critical illness rider, a term plan can cover major ailments like cancer, brain tumours, blindness, etc. You can include such riders in your basic term plan by paying a nominal additional amount.

  • Flexible Payout Options

Most term plans offer flexible payout options to the nominee, such as

  • Immediate Payout

The entire sum assured is paid in a lump sum on the policyholder’s death, and the policy ends afterwards.

  • Fixed Recurring Payout

A percentage of the sum assured is paid on the policyholder’s death. The remaining amount is paid annually over a particular duration, say 10 or 15 years, as a percentage of the sum assured.

  • Increasing Recurring Payout

A percentage of the sum assured is paid upfront on the policyholder’s death, followed by a certain percentage at the end of the first year. The annual payout increases every year after that for the remaining payout period.

  • Tax Savings

Premiums paid toward term insurance are eligible for tax deduction under section 80C of the Income Tax Act, 1961. The family of the deceased policyholder can also avail of tax deductions on the death benefits under section 10 (10D).

With so many benefits available at a reasonable price, including term insurance plans in an investment portfolio can be one of the best financial decisions that you might ever make.

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