Term plans are life insurance products that help you secure the future of your family. When you buy term insurance, you will most likely look for a policy that offers a longer period of coverage. For example, a term plan that covers you for 20 years or 30 years may be something that you will naturally gravitate towards, because your intent is to secure the future of your family over the long term.
However, what if you have some immediate significant financial liabilities that take up the near future? In that case, you may need a higher cover to take care of your liabilities and your immediate financial obligations. Here is where a 5-year term life insurance policy can prove to be extremely useful. These term plans offer a significantly high cover that could suit your needs. They also ensure that in your absence, if your family is left with significant liabilities and no reliable source of income, they are still financially secure enough to tide through those tough times provided you have planned well.
Let us take a closer look at what the 5-year term life insurance policy is really all about.
Features of 5-year term life insurance policies
To truly appreciate the benefits of a 5-year term life insurance policy, it is essential that you understand its features before you buy term insurance for the near future. There are many benefits that you and your family stand to experience by purchasing this plan. Here is a closer look at the key features of a 5-year term life insurance policy.
• Low premiums
Term plans, as you may be aware, are pure life covers. This means that the premiums charged are fully utilized for the cover alone, since there is no savings component. As a result, term plans are among the cheapest and most affordable insurance covers you can purchase for securing your family’s future. When you buy term insurance online, you enjoy the advantage of premiums being lowered even further.
• Tax benefits
5-year term life insurance policies also come with tax benefits for the policyholder. Under section 80C of the Income Tax Act, 1961, the premiums you pay for the plan are eligible to be deducted from your total taxable income up to Rs. 1,50,000. Therefore, you can reduce your tax burden significantly. Additionally, in the case of your untimely demise during the 5 years covered by the plan, the death benefits your family receives are also exempt from tax. Tax benefits are subject to provisions of Income Tax Act, 1961, as amended from time to time.
• Death benefits
Like all term plans, a 5-year term life insurance policy also provides for the surviving members of a family in the event of the policyholder’s demise. The death benefits that these plans offer remain their key beneficial feature. These death benefits are offered to the nominees/ beneficiaries if the policy is still in force. They can be paid out as a lump sum amount or as periodic payments that are made in instalments, depending on the policy terms and conditions.
• Additional riders
Term life insurance plans are pure life covers, that’s a given. However, some term insurance policies also allow you to add riders to the base plan. Check if the 5-year term life insurance policy you are considering has this feature before you buy term insurance. You can choose from a variety of riders like accidental death benefit, critical illness riders, and permanent total or partial disability riders, which can be purchased at a nominal extra cost.