Securing a term insurance for 1 crore policy is essential to ensure your family’s financial stability. It provides significant coverage at relatively reasonable premiums that all can easily afford. Moreover, it attracts substantial tax reliefs under the Income Tax Act 1961. Read on to find the right 1 crore term insurance plan suitable to your needs and maximising tax benefits.
1. Understand Your Insurance Requirements
Determine your insurance needs by evaluating your future objectives, living expenses, inflation, and income replacement. The policy should be aligned with important turning points and your dependents’ future security.
Here are some key points to keep in mind:
- Calculate Coverage Needs: Consider family financial needs, outstanding liabilities (e.g., loans), future expenses (children’s education), and inflation.
- Duration of Coverage: Choose a term (coverage term or years) that covers your estimated financial commitment to last, such as the number of years of your car loan or home loan.
- Evaluate Need by Dependents: If you are the sole earner, ensure that the 1 crore sum assured is well compensated and supports your dependents.
- Consider Lifestyle Shifts: The term insurance should also cover lifestyle changes that may be brought about in your family due to increased living expenses caused by your absence.
2. Compare Plans from Different Insurers
Here are the key factors to consider when buying term insurance:
Compare Premium Rates
- Prepare a list of term insurance plans that offer competitive rates.
- Can use online calculators to compare premium rates for 1 crore coverage.
Affordability with Comprehensive Benefits
- Look at affordable plans without compromising on coverage needs.
- Ensure the policy offers sufficient benefits for your needs.
Claim Settlement Ratio
- Choose insurers with a claim settlement ratio above 95%.
- Higher ratios depict a greater possibility of a smooth and easy claims settlement.
Policy Features and Riders
- Review the policy’s features carefully.
- Look for essential riders/add-ons like:
- Accidental Death Benefit: Provides monetary compensation in case of accident-related death.
- Critical Illness Cover: Helps manage financial burdens during health issues like diagnoses of cancer, strokes, etc.
- Waiver of Premium: This ensures policy continuation even if income and premium payments are affected by disability or severe illness.
Peace of Mind and Economic Security
- Ensure the selected term insurance policy offers financial stability and peace of mind.
3. Maximise Tax Benefits Under the 1961 Income Tax Act
- Premiums paid are eligible for tax benefit on term insurance under Section 80C up to ₹5 lakh per year.
- The death benefits paid to the nominee are exempt from tax under Section 10(10D).
- Premiums on riders such as critical illness cover qualify for further deductions under Section 80D of the Income Tax Act.
4. Select a Flexible Option for Premium Payment
- Regular Premium: For the duration of the insurance, make monthly, half-yearly, or annual payments.
- Single-Premium Payment: Pays a one-time lump sum premium at the beginning of the policy. This one-time payment covers the insurance for the entire term of the policy.
- Limited-Premium Plans: Pay premiums for a shorter period while receiving benefits for the entire policy term.
Conclusion
When choosing term insurance for 1 crore of sum assured, you must consider all aspects of personal financial obligations, policy features, and tax benefits. A term plan can give you tax advantages under Sections 80C and 80D of the Income Tax Act. With careful planning and research, your term plan can give you immense peace of mind, alongside financial security for your loved ones.
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