Term Insurance To Secure Your Child’s Future

Your life goals may vary from one stage to another. For instance, if you’ve recently earned your first pay-check, your short-term objectives may perhaps include creating an emergency fund or getting started with your savings. A little later in life, your goals could evolve to include targets like owning your first home or purchasing a car.

Once you have children, however, your goals transform to revolve around them entirely. You begin to think and plan for the long term, focusing on aspects like ensuring your child is educated well, saving up for their higher studies, investing for significant outlays like their wedding expenses or any medical emergencies.

A term plan can help you secure your child’s future in more ways than one. There are numerous term insurance benefits, and many of these are specifically geared towards giving your child a bright future even if you’re no more. However, if you’re new to the world of investments, you’re perhaps wondering: what is term insurance? Let’s get into the details and discover how it can benefit your child.

What is term insurance?

Term insurance is a kind of life insurance that provides you a protective life cover for a specific period, otherwise known as the term of the plan. In order to purchase a term insurance plan, you will be required to pay a premium to the insurance provider. The premium can be paid as a one-time, lump sum amount, or it can be paid as periodic payments on a monthly, quarterly, semi-annual, or yearly basis, depending on the product terms and conditions.

In case of your demise during the term of the plan, your beneficiaries or nominees receive a lump sum pay-out in the form of death benefits. On the other hand, if you survive the term, you do not receive any death or maturity benefits. You can purchase a term insurance plan offline, by dropping into the nearest branch of your preferred life insurance provider. Alternatively, you can also invest in an online term plan by visiting the website of the life insurance provider of your choice.

How can a term insurance plan secure your child’s future?

A term insurance plan ensures that your child’s future is not jeopardized in the unfortunate event of your early demise. Here’s how this investment can prove to be beneficial to your family in case something untoward happens to you.

• Death benefit pay-outs

This is an advantage offered by both offline and online term plans. In the event of your unfortunate demise during the term of the policy, the life insurance provider pays out a lump sum amount to your nominees/beneficiaries as part of the death benefit pay-outs. This financial assistance can help the remaining members of your family handle significant expenses such as debt repayment or medical emergencies. It can also ensure that your child continues to enjoy access to good educational facilities even in the absence of the family’s primary income earner. This way, your child’s future is secured by the benefits offered by a term insurance plan.

• Accidental death benefit rider

You can also enhance the protection offered by offline and online term plans by investing in the many rider options available. One of these riders is the accidental death benefit rider. For a nominal increase in your regular premium, you can enjoy this additional cover, which ensures that your nominees receive the rider sum assured in case you die due to an accident. This sum is in addition to the regular death benefits paid out by the term insurance plan, so your spouse and children have a financial safety net to rely on in case an accident occurs.

• Accidental permanent total/partial disability benefit rider

Accidents may not always claim a life. More often than not, they may leave you paralyzed or cause a disability that could adversely impact the quality of your life. In some cases, accidents could also impair your ability to continue working with the same efficiency you had prior to the mishap. And if you’re the primary or the sole breadwinner in your family, accidental disability could leave your dependents with no source of income to rely on. Through this rider, a sum is paid to the life assured in the case of a total or partial disability caused by an accident.

• Critical illness benefit rider

Your child’s future educational prospects may also suffer if you’re diagnosed with a critical illness, since a huge portion of your earnings may be eroded in order to seek medical treatment and support. However, by investing in a critical illness benefit rider, you can keep your savings untouched even if you’re diagnosed with a critical illness that is covered under the rider.

• Waiver of premium benefit rider

In addition to safeguarding the future of your children and loved ones, term plans also help in absolving them of any future liabilities, thanks to the waiver of premium benefit rider. You can add this rider on to your base plan for a nominal extra charge. With this rider, all future term insurance premiums shall be waived off in case of certain contingencies such as death, critical illness or permanent total disability arising out of an accident. This means that the term insurance policy will remain active until the policy expires and life assured or the family members will not have to pay any future premiums until the policy expires.

• Additional cover for your child’s education

Some offline and online term plans also offer an extended cover specifically to meet the costs associated with your child’s education in case of your demise. By opting for this variant of a term insurance plan, you can be rest assured that your child gets to pursue their higher education unhindered by the financial burden of losing the family’s primary source of income.

Conclusion

In addition to the advantages a term plan offers, you also get to enjoy tax benefits during the investment phase. The premiums you pay for the term insurance plan are deductible from your total income according to section 80C of the Income Tax Act, 1961, up to a limit of Rs. 1.5 lakhs. This reduces your tax burden. Furthermore, tax benefits also extend to the claim amounts paid out in case of your death. These amounts are tax-free as per section 10(10D) of the Income Tax Act, 1961. Term insurance tax benefits are subject to prevailing tax laws, as amended from time to time. So, by investing in a term insurance plan today, you can safeguard the future of your family and ensure that they always have a financial safety net to fall back on, even if you’re not around.