A term insurance policy is a financial instrument that ensures the security of your loved ones in the event of your unfortunate and untimely demise. The best age to buy term insurance is the early years but you can purchase a suitable term insurance plan during any stage of your life. The benefits of term insurance can be very helpful at any life stage.
What are the term insurance tax benefits?
A term insurance policy is not only helpful to your beneficiaries after your demise but it can also prove to be immensely advantageous for your current finances. There are several term insurance tax benefits that you can avail of to save money while you secure the future of your loved ones.
Here are some of the term insurance tax benefit that you can claim:
- The premiums that you pay towards your term insurance are eligible for tax benefits under Section 80C if:
- The total annual premium is less than 10% of the sum assured of your term insurance policy.
- The total annual premium is less than INR 1.5 lacs.
- The premiums that you pay towards riders included in your term insurance plan are eligible for deductions under Section 80 D. There are conditions applicable for these term insurance tax benefits namely:
- The premiums should be towards the riders mentioned under Section 80D such as Critical Illness, Surgical coverage, and other related forms of coverage.
- The annual premium paid towards the riders should be below INR 25,000 if you are below the age of 60.
- The total annual premium can be up to INR 50,000 if you are above 60 years of age.
- The payout from your policy is also eligible for term insurance tax benefits under Section 10(10D) if:
- The beneficiaries receive the death benefit in the event of your demise.
- You receive the maturity benefit after your policy matures, i.e., you survive the entire tenure of your term insurance plan. However, this is only applicable if the annual premiums paid towards your term plan were less than 10% of the sum assured.
Term insurance tax benefits can help you save money in real time while you prepare a financial plan for your loved ones as well as reap the benefits of term plan riders.
How to determine the best age to buy term insurance?
A term insurance plan is a form of life insurance that is much more affordable and available for both short and long-tenures. The term insurance tax benefits are most advantageous when the premiums for your term plan are low. Here are the determinants that impact the best age to buy term insurance:
- Purchasing term plans in your 20s –
In your early years, the risks of chronic illnesses are low. The insurance providers offer term plans for very reasonable rates as per your medical history. It is the best age to buy term insurance at a low rate of premium for an extended tenure so that you can reap the term insurance tax benefits as well as secure your beneficiaries’ future finances. - Purchasing term plans in your 30s –
In your 30s, you may develop habits and lifestyle choices that affect your medical history. Therefore, even though the premiums for term insurance will be lower than most forms of life insurance policies, they will not be as low as in your 20s. If you skipped purchasing a term plan before, this is still the best age to buy term insurance before the premiums skyrocket. - Purchasing term plans before you reach the age of 60 –
Between the ages of 40 to 60, most individuals develop long-term health issues, which inadvertently impact the rate of term insurance premiums. The term insurance tax benefits will also be reduced due to higher premiums. However, it is the best age to buy term insurance before you become a senior citizen. - Purchasing term plans after the age of 60 –
Senior citizens are more likely to succumb to health issues as well as the rate of mortality. Therefore, the premiums are much higher and you will need to avail of several riders for medical attention. It is technically not the best age to buy term insurance plans.
The best age to buy term insurance is before you turn 40 so that you can reap maximum term insurance tax benefits as well as curate reasonable riders. However, it is never too late to secure the future of your loved ones with a suitable term plan.
Conclusion
Term insurance tax benefits can help you save a lot of money legally as per the Sections 80C, 80D, and 10(10D) If you purchase the policy during the best age to buy term insurance then you can reap many included benefits as well as tax benefits. The premiums are low and you can avail of death benefits for your beneficiaries at low rates. If you survive the tenure of your policy, the premiums accumulated over the years can serve as excellent savings in your golden years.
