LIC term plan is the first life insurance of choice for so many Indians. They offer security, financial benefits, and tax benefits. While the security is mainly due to the brand that LIC has become today, the financial benefits and tax benefits have evolved over time.
Today, an LIC term plan offers death benefit as well as maturity benefit. That means irrespective of the fact that the policyholder is alive or not, the policy still delivers a lump sum payment to the beneficiaries. Similarly, its tax benefits help people plan their investments and their tax returns, in addition to getting a life cover.
Table of Contents
Why Are Term Plans Important For You
Term plans offer a range of benefits that not only help you in the present but protect and serve you in the future as well. Here are some of the ways that LIC term plans in 2018 can benefit you.
A term plan offers security to not only the policyholder but the family members as well. It represents a financial compensation to make up for the loss of income for the family when the main earning member passes away. To offer financial support in such times represents a motif of security for the dependents. Without such offering, the family members will be entirely dependent on savings, if any, or fall into the financial crisis. The monetary benefits of the term plan offer protection against such situations so that the final rites can be initiated and an alternative income source can be developed.
#2 Multiple beneficiary options
LIC term plans offer the option to set multiple beneficiaries. These beneficiaries are – preferred beneficiary, primary beneficiary, and a contingent beneficiary.
The preferred beneficiary can either be a spouse, parent, children, or grandchildren. This option lets the policyholder denote the kind of beneficiary that shall remain a priority over other non-declared beneficiaries.
The primary beneficiary is the first choice to receive the benefits from the policy. A primary beneficiary needs to be allotted in case you want the benefits to be passed on to a certain person. There can be more than one primary beneficiary.
The contingent beneficiary is declared for the benefits to be received by a person in case the primary beneficiary has deceased and there’s no one else to receive the benefits. In case, there is no primary, preferred or contingent beneficiaries, the benefits are passed on to the estate.
#3 Ability to pay off loans
With the help of the maturity and death benefits, the remaining survivors or the beneficiaries can look to pay off loans or any outstanding credit that the policyholder has left behind. In case a person dies without holding a term plan, the remaining survivors are left to pay off the pending loans. However, with the help of the lump sum payments, they can now pay off any remaining loans.
#4 Low premium amount
One of the biggest benefits of LIC term insurance policies is that it offers the option for all and sundry to invest. The insurance premium is extremely low and reasonable, often depending on the sum assured, which allows people all walks of life to take advantage.
#5 Tax benefits
Just like investing in a term plan has two aspects – life cover and tax benefits, so do the tax benefits cover two different aspects. The insurance premium indicates the financial commitment of the policyholder to the insurance company. This concludes the first monetary aspect of an LIC term plan.
The second monetary aspect is triggered when there is a claim made. This can either be due to the policy reaching maturity or the death of the policyholder. In such cases, a lump sum amount is paid out to the beneficiaries as claim amount.
LIC term plan’s tax benefits cover both these aspects. A policyholder can leverage Section 80C and 10(10D) under the Income Tax Act, 1961 to gain income tax benefits. Under section 80C, the policyholder can claim the premiums paid as a deduction. The maturity or death benefit amount received from the insurance company can be claimed under section 10(10D).
Essentials of Buying LIC Term Plans
Now that you know why term insurance is important for you, here are some of the best tips to help you buy term plans.
#1 Buy online
Almost everyone has at some time or other, consulted an insurance agent. Unfortunately, some insurance agents are unaware of the various policies available and remain ill-prepared to advise a client. That’s why buying online helps you remove the middleman and avoid risks of mis-selling.
#2 Compare plans
With sites like Coverfox.com, you can compare LIC term plan quotes and policy features seamlessly. Simply fill in a few details and watch all the suitable options pop up on your screen.
#3 Disclose truthfully
In order to get the best benefits and have a seamless claim process, it’s best to truthfully disclose all behaviours as needed by the insurance company.