Impact of a Compulsory Term Insurance on Your Financial Health
What if term insurance is made compulsory just like car insurance in India? It sounds like another expense added to the current expenditure, right?
Well, as a term insurance policy doesn’t come with a maturity value, you might consider it as an expense only.
The biggest irony is that you spend time in choosing car insurance because it is mandatory, but you don’t give importance to something that is more important than your car, that is your ‘Life’.
It is advised to make term insurance compulsory because it gives the following benefits:
- Secure Your Family’s Financial Future
Throughout your life, you work tirelessly to provide comfort to your loved ones. But what if you are not there to support your family? Who would take care of your family’s needs in your absence? Term insurance is not for you, but your family. It provides financial security to your loved ones in case of an eventuality.
In your absence, with the sum assured received, your dependent can repay monthly household expenses, child’s education fees or any other liability.
- Give Debt-Free Life to Your Family
You don’t want your family to deal with financial liabilities in your absence, right? A term insurance plan will take care of any outstanding debt, like a home loan, car loan, credit card bills, etc.
Even if you had never taken any loan, your absence might compel your family to take one. If you do not want your family to be burdened with financial liabilities, there is no better option than buying the best term insurance plan.
- Secure Your Child’s future
As a parent, it is your dream to send your kid to one of the top educational institutes of the country. The education sector in India has undergone revolutionary changes in the last few years. On the one hand, while globalisation has improved the quality of education in India, on the other hand, it has escalated the cost of education. Even tuition fees in schools have skyrocketed.
Have you thought how insecure your child’s future might become if you are not there? While you can have big dreams for your child, it is essential to buy a term insurance plan to preserve and fulfil those dreams.
- You will pay less tax
You work hard every day, but when you get a paycheck, a huge amount is already subtracted in the form of tax. To save your hard-earned money, you must look for tax-saving options. One of the benefits of buying a term insurance plan is that it comes loaded with tax benefits. According to Section 80C of the Income Tax Act, the premiums paid by you are tax-exempted up to Rs 1.5 lakh. Even the payout received by your family will be non-taxable under Section 10(10D).
Insurers are rooting for compulsory term insurance in India
Unlike other nations, India doesn’t have a social security scheme to take care of different insurance needs of its citizens. Hence, life insurers opined that having a term insurance plan as compulsory could be beneficial for policyholders.
Moreover, many people prefer to go with endowment policy, ULIPs, etc.; to cover their life. However, people don’t realise that unlike a term insurance cover, the protection cover in these investment products is either negligible or nil. You can use these investment options as a wealth creation tool only. For life cover, go with term insurance only.
As per the Swiss Re sigma report, overall insurance penetration in India stood at 3.42%, while the world’s average is 6.2%. By making term insurance mandatory in India, the government can increase the insurance penetration in India.
Even after making term insurance mandatory, the government should take steps to make this insurance policy affordable for everyone. Though term insurance offers extensive coverage at low premium rates; the government should provide schemes for people who can’t afford insurance at all.
End of the day, buying the best term insurance plan is like buying peace of mind. It will give you peace because you know if anything bad happens tomorrow, at least your family wouldn’t have to suffer. They would have the financial security to help them carry on their lives with dignity.
Reiterating, term insurance is not for you, but your family. So, buy it even it is not compulsory. After all, your family’s financial security should be your top priority, right?