For long, in­sur­ance poli­cies have been sold as in­vest­ment prod­ucts, rather than as safety nets, pro­vid­ing fi­nan­cial se­cu­rity against un­fore­seen events. How­ever, more mil­len­ni­als are con­sid­er­ing term in­sur­ance plans over tra­di­tional en­dow­ment in­sur­ance plans. Term plans are pre­ferred for two rea­sons: one, they of­fer a sub­stan­tial cover for a rel­a­tively low premium com­pared to other poli­cies. Two, it’s a plain vanilla plan that only of­fers in­sur­ance. Oth­ers such as tra­di­tional poli­cies usu­ally fail to ei­ther give you de­cent in­sur­ance ben­e­fits or good re­turns.

“Term plan is the right way to get in­sur­ance. It is low cost, ad­dresses the risk man­age­ment part of the fi­nan­cial plan­ning and also saves tax,” said Ro­hit Shah, founder and CEO, Get­ting You Rich, a fi­nan­cial plan­ning firm. As a rule of thumb, buy a term plan with an in­sur­ance cover of at least 10 times your an­nual in­come.

Be­sides, pre­mi­ums for such poli­cies qual­ify for tax de­duc­tion un­der Sec­tion 80C of the In­come Tax Act, pro­vided the sum as­sured or in­sur­ance cover is at least 10 times the an­nual premium. Sec­tion 80C car­ries an over­all de­duc­tion limit of ₹1.5 lakh.

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