The main benefit you enjoy from your term plan is the life cover. This cover is beneficial for your family, who may have to face financial uncertainties. When you buy a term plan, there are certain things you would consider before. Usually, they are related to cost and duration. Not many know that when you opt for term insurance, going for a long-term has more benefits than a shorter one. What are the benefits of a long-term plan? Read more to find out.
What is term insurance?
A term plan is a type of life insurance policy. When you invest in a term plan, there is an agreement between you and your insurer; after that, the insurer will compensate your family in the event of your sudden demise. This compensation is known as life cover. Based on the plan you selected, the insurer will give the life cover amount offered. You can choose from different types of term plans based on your requirements.
What is a long-term term plan?
A long-term plan is a term plan where the plan’s duration is more than that of a short-term plan. While people usually opt for a term plan but mostly go for a short-term one. However, there are various benefits that a long-term plan has over a short-term term plan, from better coverage to affordability.
When you opt to purchase a long-term term plan, you get to enjoy the following benefits:
1. Coverage for a longer duration
Tragedies are unpredictable. We can never be prepared to tackle them head-on. However, having the financial strength to tackle them is still of utmost importance when facing a life risk. For example, suppose a person opts for a short-term plan of 20 years, but the person passes away after the policy has matured. In that case, that person’s family could be financially burdened, especially if the person was the family’s sole earner. On the other hand, having a long-term plan will cover that person’s family for almost 80-90 years. This would mean longer coverage from life risks.
2. Premiums are affordable
There is a misconception that long-term plans have a higher premium than short-term goals. Compared to short-term goals, long-term goals have more affordable premium options. This is mainly due to the duration of the project itself. In a short-term project, the premium is more due to the time of the plan. In long-term goals, you can start from the lowest amount possible without any hassles. You also have the flexible option of making monthly or yearly payments. Also, the sooner you invest in one, the lower the premium.
3. Add-ons increase coverage
You have the option of including different add-ons to your long-term term plan. Add-ons such as hospital cash benefits, critical illness benefits, and personal accident cover can be included in the plan. In the event of a medical emergency, these add-ons can come handy. In a short-term plan, once the plan matures, you will be forced to pay for the medical expenses yourself. However, your long-term plan allows you to not worry about the costs with the help of these add-ons.
4. You can avail of tax benefits
The premium you pay for the long-term term plan is eligible for tax exemptions under Section 80C of the Income Tax Act. This exemption is for tips of up to Rs.1.5 lakhs. Since these plans have affordable premiums, you can save money on tips. Also, the death benefit your family would receive would be eligible for tax exemption under Section 10(10D) of the Income Tax Act. Your family will not have to worry about getting a deducted life cover amount.
5. Better life cover amount
Compared to short-term plans, you can get a better life cover option in a long-term project. This is due to the duration of the project. If you want to opt for a better life cover in a short-term project, you will be required to shell out more premiums for the coverage. However, with the longer duration and flexible payment options, your loved ones can easily enjoy a better payout.
These are just a handful of reasons why you should opt for a long-term plan. You can visit the website of a life insurance company and use their term insurance plan calculator to get an idea about the cost and benefits of the plan as per your requirements.