Term insurance offers financial protection and security to your loved ones and yourself so that you are able to meet life goals in spite of all the uncertainties that life throws at you.
What is term insurance?
Term insurance is a pure protection plan that is valid for a term or specific period on payment of defined premium. In the unfortunate event of the insured person’s death during the term, the nominee receives death benefit, be it in the form of lump sum or instalments. This means your family can continue to lead the lifestyle they were used to, in your presence, and all their life goals would be met. Term insurance also makes sure your loved ones’ wealth is protected. In the absence of a term insurance policy, the family’s wealth and savings would have been depleted owing to the loss of income. Term insurance is important if you have loved ones dependent on your income or if your contribution to the family’s finances is significant.
If you survive the term policy, you do not receive any maturity benefits but by opting for a term insurance policy, you have ensured that your near and dear ones have a ring of protection around them.
Term insurance also comes with other benefits. It is cost-effective and necessary for people from all income brackets. It also gives you the option to increase coverage when you enter a new life stage, for example, marriage or the birth of a child, without having to undergo any additional medical check-ups as per conditions mentioned under the term plan. Then there is the added benefit of term insurance riders, which can be availed on payment of nominal extra cost. These are add-on plans or features that you can opt for in case you need extra coverage for certain illnesses, disability, accidental death or waiver of premium. These benefits ensure your life goals are met and protected in spite of the twists and turns there may be along the way.
You can make use of the term insurance calculator to calculate the insurance cover you need to help you meet the life goals of your family and to keep them secure.
Term insurance tax benefits under Section 80C and 10(10D)
Choosing term insurance gives you tax benefits under Section 80 C and 10(10D) of the Income Tax Act 1961 (the Act), subject to provisions stated therein. Under Section 80C, you can claim a deduction of up to Rs 1.5 lakh annually on the premiums you have paid. Under Section 10(10D), the death benefit of your term insurance policy is exempt from income tax, so long as the sum assured is at least ten times of the premium paid annually.
Now that you know all about the term insurance tax benefit under Section 80C, let us see if you can claim a benefit under any other Section of the Act as well.
What is Section 80D of the Act & what it normally covers
Can term insurance be claimed under 80D? The answer is yes, but under certain circumstances. Tax benefits are available under Section 80D for premiums in health insurance plans. However, insurers offer term insurance with critical illness riders or other health riders such as surgical care. If the term insurance policy offers a health rider and you have opted for the rider, then the premium on such a rider can be claimed under Section 80D. However, the remaining premium amount would need to be claimed under the Section 8C of the Act.
You can claim these benefits when you file your returns under the category of deduction under Section 80D, after clicking on assessment year. In addition, when you claim tax deductions when you have a health rider for your term insurance under Section 80D, here are some things you need to remember:
• In a scenario where you have a critical illness term policy for yourself, spouse and children and all of you are below 60, you are eligible for a tax deduction of up to Rs 25,000.
• If you provided cover for your parents under a separate but similar policy and they are over 60, the deduction eligibility is up to Rs 50,000.
How to claim term insurance tax benefits under Section 80D
As we already know that the answer to the question - "Can term insurance be claimed under 80D?" is yes, let us look at how to claim term insurance tax benefits under this Section. As mentioned before, term insurance comes with health riders, which can be added to your basic term plan. The health riders also allow you to claim term insurance tax benefit under Section 80D. For instance, you can claim deduction on the critical illness rider you buy with your term insurance as Section 80D offers tax exemption for these medical expenses.
Do not forget to make use of the term insurance plan calculator to check the amount of coverage you need. If you avail of riders, you should remember to check the added exemption you get for some of them under Section 80D.
Term insurance is a pure protection plan that is aimed at securing the future of your loved ones and ensuring that the family’s life goals are met. An added benefit is that you can claim tax deductions on term insurance premiums, and your nominee/family can claim exemptions on the death pay out under Section 80C and 10 (D) of the Act respectively. Further, Section 80D of the Act lets you claim tax benefits for certain riders you buy to cover medical expenses pertaining to critical illnesses or disabilities. Getting a term insurance policy can be the valuable gift you can give to your loved ones, so go for it.