Retirement is a period wherein one wishes to live a life of relaxation. It is the time when one enjoys the fruits of their labour in the golden years of their life after having worked hard previously. To best enjoy one’s post-retirement years, it is important to be financially strong. When one is young and earning on a regular basis, one must make the right financial decisions when it comes to retirement planning. Buying a term plan is one such decision. A term plan helps you ensure that your loved ones are financially secure, even in your absence.
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However, many people tend to cancel their term plans when they near retirement. Or some choose a tenure whose maturity often coincides with their retirement year. Though this may seem like a commonly accepted practice to do, it may not always be a wise idea. There are many reasons why one should have a term insurance plan in their retirement years.
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How does term insurance work?
First, let us understand how term insurance works to better understand its importance during retirement. Term insurance is one of the simplest forms of life insurance plans. A term plan provides financial protection to your policy beneficiaries. When you buy the plan, you pay a premium as per the policy agreement. This premium depends on several factors, such as age, gender, occupation, lifestyle, and so on. One can use the term insurance premium calculator to get an estimate of the premium they might possibly incur.
Your continuous payment of the premium ensures to a great degree that your family does not have to suffer any monetary woes when you are no longer around. The sum assured is paid to the beneficiaries (usually a family member/family members) if the policyholder passes away during the tenure of the plan.
Why term insurance is vital during retirement
You get to enjoy tax benefits
You can claim tax deductions up to Rs 1.5 lakhs against the premiums you pay for your term plan under the old tax regime. If you are over 60 years old, then your term insurance tax benefit may even increase to a slight degree. The death benefit your beneficiaries receive is also exempted from tax under the old tax regime. Some tax benefits may not be applicable under the new tax regime.
These tax benefits ensure that your finances are parked in the right instruments and do not get eroded unnecessarily with taxes.
Your children may not be financially independent yet
Most parents plan their retirement in such a way that their children have started their careers by then. However, these days, many young individuals tend to start their careers late, instead preferring to complete their master’s degree or executive study programs. Your children may not be completely financially independent even when you retire. In the event of an untimely demise, they may require financial assistance, which a term plan can provide.
You get to leave a legacy
Even if your loved ones are financially independent by the time you retire, you may want to help them and leave a legacy for them. You can even choose your grandchildren as the nominee for your policy so that when they come of age, they have a strong financial background to start with. A term insurance plan can allow you to do that. Choosing the right tenure is important in such scenarios. A long tenure is ideal if you intend to leave a legacy with your plan. A term insurance premium calculator can help you figure out the premiums for a long-term plan.
Your spouse benefits from financial independence
If you choose your spouse as the primary nominee of the policy, they get to benefit from a robust financial support system as well. At a senior age, especially, when one is more prone to health issues, money becomes a sensitive matter. The sum assured from your term insurance plan can help your spouse to deal with such issues with dignity and financial freedom.
Plus, they also enjoy the term insurance tax benefit of not having to pay any taxes on the life cover amount.
Do consult with a financial advisor regarding your finances before you buy a term insurance plan. Ensure to sign the policy proposal form only after you have read the policy wordings carefully.