Term insurance is one of the purest forms of life insurance. It assures financial protection to the policyholder’s family if something happens to them during the policy period. Over the years, term insurance has evolved significantly, and the insurance companies offer different plans to suit different customers’ needs.
One of the most purchased plans is the level term insurance. The level term insurance plan, commonly referred to as a level premium term plan, is one of the most cost-effective forms of term life insurance. The premium remains the same throughout the policy period in the level term plan.
Benefits of buying a level term insurance policy
The level term insurance plan is the most basic and simplest form of term insurance. When you buy this type of life insurance policy, you will know the maximum premium amount you must pay, and the sum assured you will leave for the beneficiary if something happens to you.
Another significant benefit of buying a level term insurance policy is that it helps you budget the expenses effortlessly. Knowing the maturity amount your family may receive; you can plan your other investments accordingly so that your family has enough financial back-up after you are gone. Since the premium is fixed, you can also manage your expenses easily.
The level term insurance plan offers excellent stability. The fact that the sum insured, or the coverage amount will remain the same throughout the tenure, you can stay stress-free about your loved ones’ future. Also, you can have the stability of paying a fixed premium for the entire policy term.
Generally, the level term insurance plans with longer coverage tenure. You have the flexibility to choose the policy term to suit your specific needs. You can choose the coverage for 5 to 20 years or more. The earlier you buy the policy, the longer your family gets financial protection against the uncertainties. As you grow older, you may have to renew the policy every year. This means the coverage allowances progress with each passing year.
Like any other life insurance policy, you can enjoy tax benefits and reduce your annual tax liability with a level term plan. The premium you pay for the policy is eligible for tax benefit under Section 80C of the Indian Income Tax Act, 1961. You can get a maximum deduction of
₹1.5 lakh in a financial year.
The tax benefit on level term plans is not limited to the premium payment. The death benefit that your family may receive in the event of your demise, the amount is fully tax-exempt.
The best thing about level term insurance is that you need not worry about increasing the premium or decreasing the sum assured. You can get higher coverage for your loved ones with level term insurance with proper planning.