A term insurance policy is one of the most affordable ways to secure the financial future of your family and ensure that their life goals remain unaffected. When you purchase a term insurance plan, you are essentially buying a life cover for a specified period.
In exchange for this life cover, you are required to pay regular premiums to your insurer. Should the event of your unfortunate demise happen during the tenure of the policy, the insurer pays out death benefits to your nominee or beneficiary. Your family can then rely on those funds to meet major costs, maintain their standard of living, settle any debts in your name, and meet other major life goals.
Given these financial benefits, many individuals often wonder: Is term insurance tax-free? It turns out that there are several sections under the Income Tax Act, 1961 that allow you to get term insurance benefits in the context of tax saving.
Tax benefits on term insurance
So, is term insurance tax-free? The short answer is yes. Term insurance benefits include tax benefits under three different sections of the Income Tax Act, 1961. These are –
• Section 80C
• Section 10(10D)
• Section 80D
Let us look into the details of these term insurance tax benefits -