Shyam: Hey Mohan, I’ve been hearing a lot about term plans in personal finance. Are they really that important for risk management?
Mohan: Absolutely, Shyam. Term plans are essential for several reasons. They offer a high life cover for a relatively low premium compared to other insurance plans, making them a cost-effective choice.
Shyam: That sounds promising. Are there benefits to starting a term plan early?
Mohan: Yes, starting early is key. The younger you are, the lower your premium will be. Locking in a low rate when you’re young can save you a lot over the years.
Shyam: What about the flexibility of term durations? How does that work?
Mohan: Term plans are quite flexible. But it is always advisable to have the term plan till you work or till all your liabilities like home loans and other liabilities are over. The ideal scenario would be to have it till the age of 60.This ensures your family can handle financial obligations if anything happens to you during that period. Remember one thing if you delay buying your term plan by a year you end up paying more with every passing year.
Shyam: Are the premiums fixed throughout the policy?
Mohan: Yes, once your premium is set, it won’t change for the term of the policy. You can count on paying the same amount annually, making budgeting easier.
Shyam: Are there any tax benefits?
Mohan: Absolutely. You can claim a deduction of up to ₹ 150,000 per annum for the premium paid under Section 80C, and the death benefit is tax-free under Section 10(10D).
Shyam: Sounds like term plans are a crucial part of financial planning.
Simplified Money Talks 