You’ve probably heard and re-heard the story of Cinderella. In that tale, a fairy godmother magically transforms Cinderella’s pumpkin to a carriage, mice to footmen and gives her a gown made of gold and silver and slippers made of glass so that she can attend her dream ball. The only condition is that Cinderella must come home before midnight when all those things would go back to their previous forms.

You dedicate your life to your children and often create a fairy-tale. You give them toys to engage them, books to spark their imagination and good schools to educate them well. However, unfortunately, you do not know if the clock will suddenly strike midnight.

But you can be prepared if it does.

Term insurance will protect your family’s future at a very reasonable cost.

It only pays money to your family, on your death. It has no maturity value after a certain number of years.

Below, we give you 7 bad reasons for not buying term insurance:

1. My wife will take care of the child

Yes, but can she take care of a child, a home, and a job, by herself? Should she have to? If your wife is a full time home-maker, she will have to find a job without much time to prepare herself. Even if you have other relatives who can step in, an uncle or aunt often cannot completely make up for a parent’s loss in either emotional or financial terms. They also may not have the means to do so. Is this a chance you want to take?

2. I already have investments for my kid

As you might already know, raising a child costs a fair amount of money. By age two of your child, you may have already spent good amount of money. Your child will need funding for his upkeep, schooling, (foreign?) university and all the ancillary expenses that crop up along the way including medicines and vacations. Who will make investments in your absence to meet these expenses? Unless you’ve set aside a small fortune for your child, you will need Term Life Insurance.

3. I already have a life insurance policy

People may confuse between Endowment Plan and Term Plan. The Endowment plan combine insurance and investment. They pay out either on death or after a certain number of years. However, Endowment plans generally offer lesser life insurance cover than insurance cover offered by term insurance. For example, a 60,000 annual premium will get you a 6 lakh cover in an endowment policy. On the other hand, you can get a 60 lakh cover in a term insurance policy at a much lesser premium.

4. My company provides a term plan

Once again, unless your company is very generous, this will not be enough. Also in today’s world, jobs may change frequently. A company-provided term plan is not likely to extend beyond your employment with the company. And what if you decide to take a break, start your own business or leave to follow your passion? Should you be left without cover? Should your wife and kids be left without protection?

5. I have EMIs to pay, I will buy a term plan later

This line of thinking ignores the fact that there may be nobody left to pay the EMIs if you die. All your hard work and monthly sacrifice will go waste and your family may be deprived of a home. Think again. If your finances are really stretched, go for a smaller life cover. Ten times your income is the thumb-rule but even five times will help to some extent.

6. I have little money to spare, after taxes

Actually, your life insurance premium will get you a deduction from taxable income^ up to Rs 1.5 lakh per annum under Section 80 C. This will let you pay lower taxes and protect your family. If you have used up your annual 80 C deduction, pay your premiums monthly - this will allow you to get the tax deduction on all of your premiums in the next financial year.

7. I’m young, death is a remote possibility

This is generally true, but the more important question is – do you want to take this chance? Your body is healthier when you are young but the chances of meeting with an accident or catching an infectious disease or dying from a hundred other causes are the same, regardless of age. What happens to your kids then? Do you really want to take this chance? But you may think – What if I outlive the term insurance policy, the money is wasted. Think again, living longer is a good thing. Isn’t it?

When should you buy term insurance?

The sooner the better. Premiums tend to be lower, the earlier you purchase the policy. Also, do you really want to wait when your family has already grown and is without protection?

 

^ Tax benefits under the policy are subject to conditions under Sec. 80C, 80D and Sec 10(10D) of the Income Tax Act, 1961. Service tax and applicable Cesses will be charged extra as per prevailing rates. Tax laws are subject to amendments from time to time.

1Tax benefit of ₹ 54,600 (₹ 46,800 u/s 80C & ₹ 7,800 u/s 80D) is calculated at highest tax slab rate of 31.2% (including Cess excluding surcharge) on life insurance premium u/s 80C of ₹ 1,50,000 and health premium u/s 80D of ₹ 25,000. Tax benefits under the policy are subject to conditions under Section 80C, 80D, 10(10D) and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.

2Tax benefit of ₹ 7,800 is calculated at highest tax slab rate of 31.2% (including Cess excluding surcharge) on health premium u/s 80D of ₹ 25,000. Tax benefits under the policy are subject to conditions under Section 80D, 10(10D) and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.

*Tax benefits under the policy are subject to conditions under Section 80C, 80D, 80CCC, 80CCE, 80G, 80GG, 80E,10(10D), 10(10A), 10(13A) and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.

3Tax benefit of ₹ 46,800 is calculated at highest tax slab rate of 31.2% (including Cess excluding surcharge) on life insurance premium u/s 80C of ₹ 1,50,000. Tax benefits under the policy are subject to conditions under Section 80C, 80D, 10(10D) and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.

W/II/2621/2018-19

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