The Role of Term Insurance in Your Family’s Wealth and Tax Planning

The Role of Term Insurance in Your Family’s Wealth and Tax Planning

Life is unpredictable, and it’s crucial to have a plan in place to protect your family if the unthinkable happens. The emotional impact of losing a loved one may fade over time, but the financial impact can leave generations in distress. That’s where term insurance comes in. It offers a safety net that ensures your family’s financial well-being even when you cannot provide for them.

Benefits of a Savings Plan for Your Family – Term Life Insurance Plan

A term life insurance plan is a savings plan that provides cover to protect your dependents upon death. Unlike other life insurance policies, term insurance focuses solely on providing a death benefit to your loved ones. However, recent developments have made term insurance more lucrative, offering living benefits that allow policyholders and their dependents to receive all the premiums paid back (except taxes) after the policy’s maturity or if the policyholder outlives the term.

Here are some of the key benefits:

Medical Care: Safeguarding Your Health and Resources

Medical costs continue to rise with increasing inflation, making quality healthcare expensive. Investing in term insurance ensures that your family has access to the best medical care without depleting their resources.

Not only does term insurance cover medical expenses in case of an unfortunate event, but it also provides additional benefits through riders, such as critical illness coverage or surgical care coverage. These riders offer financial support during challenging times and help ease the burden of medical expenses.

Tax Benefits: Maximising Your Earnings via a Savings Plan

Term insurance offers substantial tax benefits under section 80C of the Income Tax Act. Investing in a term insurance plan can reduce your taxable income by up to ₹1.5 lakh per year. Furthermore, the lump-sum payout received by your family upon your demise is also exempt from tax under section 10(10D).

Income during Retirement: Enjoying Your Golden Years

Retirement is often referred to as the “golden years” of life. After a lifetime of hard work and dedication, enjoying this phase without financial worries is essential. Term insurance with living benefits can provide a regular income during your retirement years.

Let’s assume you have a term insurance policy with living benefits maturing when you turn 60. The maturity amount can be utilised to fulfil all your retirement plans, from taking a comfortable holiday to enjoying the best luxuries. This ensures you lead a debt-free and financially secure life during your golden years.

Financial Security and Peace of Mind: Empowering Your Loved Ones

One of the biggest concerns for individuals entering retirement is becoming financially dependent on their children or relatives. Term insurance with living benefits allows you and your spouse to maintain financial independence and live comfortably without relying on anyone else.

The lump-sum payout received from your term insurance policy can provide financial security to your loved ones, ensuring they can meet their expenses and pursue their own interests. This guarantees peace of mind for you and empowers your family members to live life to the fullest.

How a Term Life Insurance Plan Fits Into Your Wealth and Tax Planning?

This section provides a discussion of the key aspects that fit your wealth and tax planning:

Term Life Insurance Plan as a Savings Plan

A term life insurance plan is an excellent savings plan that combines insurance protection with long-term financial growth. By paying regular premiums, you secure your family’s future and accumulate funds that can be accessed during retirement or other financial goals.

For example, if you have a term insurance plan with living benefits, you can use the maturity amount to meet your child’s education expenses or make a down payment on a new house. It acts as a dual-purpose tool, offering life cover while growing your investment.

Term Life Insurance Plan and Tax Planning

Term insurance provides significant tax benefits, making it integral to your tax planning strategy. Under section 80C of the Income Tax Act, the premiums paid towards term insurance are deductible from your taxable income. This reduces your tax liability while ensuring financial security for your loved ones.

Additionally, the maturity amount received from a term insurance plan is exempt from tax under section 10(10D). This means that your family’s lump-sum payout or regular income is free from any tax deductions. You can maximise your savings and optimise your tax planning by leveraging these tax benefits.

Tax Benefits on Term Life Insurance Plan Riders

Various term insurance riders are offered by insurance companies to provide supplementary coverage. However, their benefits are not limited to strengthening a term insurance policy beyond its core features.

Depending on the rider you select with a term plan and related conditions, you can avail of additional term insurance tax benefits. Riders like the ‘return of premium’ when choosing a term plan increase its premium, saving you more under Section 80C. You can check how the premium varies with the inclusion of riders using an online calculator.


In conclusion, term insurance is vital to securing your family’s wealth, tax and planning. It offers various benefits, such as medical care coverage, substantial tax savings, income during retirement, and overall financial security for your loved ones. By choosing a term life insurance plan, you can protect your family’s future and ensure their well-being even when you’re no longer there.

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