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Is Purchasing a Term Insurance Plan an Investment or an Expense?

Published On Sep 09, 2021, Updated On Sep 09, 2021

The market is full of investment opportunities, and a term insurance policy is one such instrument. Some may view a term plan as a cost because it offers pure insurance coverage with no investment rewards. On the other hand, it is a comprehensive insurance shield that protects your priceless life. Read on to know if purchasing a term insurance plan is an investment or an expense.

What is a Term Insurance Plan?

A term insurance policy provides life insurance for a certain period of time, like 5 years, 10 years, 15 years etc., in exchange for premium payments. If the policyholder dies within the policy period, the death benefit is paid to the nominee or the policyholder's family. However, if you live longer than the insurance policy's duration, there are no maturity benefits.

Is Purchasing a Term Insurance Plan an Investment or an Expense?

People believe it is pointless to pay thousands of rupees each year with the potential of not receiving any of it back if one survives the policy term. Furthermore, many believe that investing in a fixed deposit or recurring deposit rather than a term insurance policy will also allow them to earn interest. However, if you lever these arguments against different benefits of a term insurance plan, you will find the scales of a term insurance plan to be heavier.

Must Read: Term Insurance Income Tax Benefit As Per Section 80C

What are the Benefits of a Term Insurance Plan That Makes it an Enticing Investment Instrument?

The term plan offers multiple benefits.

  • Financial Protection - The plan provides dependable security for the family in difficult times. When you pay your term plan premiums, you are purchasing financial assurance for your family, ensuring that they will be protected in the event of an unforeseen incident in the future. Your peace of mind is your term plan.
  • Potential Returns - The high coverage at low premiums mitigates the difference between cost and prospective returns. Therefore, you will not incur any financial losses as a result of this policy. Term plan premiums and death benefits, on the other hand, are tax-deductible. You can also renew your plan at any time to ensure that you have coverage for the rest of your life.
  • Better Benefits than Fixed Deposits - FDs are a type of investment that keeps your money secure while also providing a small return. There is no life insurance. A term plan, on the other hand, has modest premiums and provides a substantial amount of insured coverage, so it is a better way to protect your family than a savings account.
  • No Restrictions on Death Benefit Usage - There are no limitations on how your family can spend the money. They could put money towards your final rites, ceremonies, school costs, daily needs, or whatever else they want. In the long run, they will be secure and at ease with plans that offer to pay out a portion or all of the money assured in regular monthly payments.

Take Away

The future can't be predicted. You may not want to think of death, accident, disability, illness, or anything else, but you must arrange for your family's safety while you are gone. If the unfortunate event happens, your family will be spared at least one source of worry: money. Hence, it is only appropriate to ensure that they have a sense of stability and tranquilly even after your demise.

Also Read: Can I Buy A Term Insurance With Income Proof?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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