A type of life insurance policy known as “term” insurance offers coverage for a predetermined amount of time, or “term,” such as 10, 20, or 30 years. The beneficiaries of the policyholder get a death benefit if they pass away within this term. The insurance usually expires worthless, and if the policyholder lives out the term, there is no payoff.
Uses of Term Insurance
Financial Protection
In the event of an early death, it offers the policyholder’s family financial stability. Debts, other financial obligations, and living expenditures may be partially met by the death benefit.
Affordability
Because term insurance only provides coverage for a predetermined amount of time and does not accrue cash value, it is frequently less expensive than permanent life insurance.
Temporary Needs
It can be used to meet short-term expenses like a mortgage or the years you have dependent children.
Tax Benefits Under Section 80C
Section 80C of the Income Tax Act grants tax benefits to term insurance premiums in India. A deduction of up to ₹1.5 lakh can be made annually from the premiums paid for term insurance contracts. This deduction is included in the total amount allowed under Section 80C, together with other permissible investments such as the Equity Linked Savings Scheme (ELSS), Public Provident Fund (PPF), and National Savings Certificate (NSC).
Tax-Exempt Status
Premium Payments
Under Section 80C, premiums paid for term insurance are deductible from taxes.
Death Benefit
Under Section 10(10D) of the Income Tax Act, the beneficiaries’ death benefit is normally tax-free as long as the premiums paid for policies issued after April 1, 2012 do not exceed 10% of the total assured.
Comparative Analysis of Other Insurance Types:
Term vs. Permanent Insurance
Whole Life and Endowment Plans, two types of permanent life insurance, provide coverage for the insured person’s whole lifetime and also accrue financial value. They are typically more costly than term insurance, though.
Steam insurance as opposed to term insurance
If you intended to say “steam insurance,” you may have misread or spelled something. “Steam insurance,” which is not a commonly used phrase in the insurance industry, is often unrelated to term insurance.
In a nutshell term insurance provides an affordable means of securing financial security for a predetermined amount of time, and it offers tax advantages under Section 80C. If you want pure risk coverage without the hassles and higher premiums of permanent life insurance, this is a sensible option.
