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How to Get Benefits of Term Insurance and Taxes

Imagine paying less tax and securing your family’s financial future. Sounds ideal, right? Well, it’s not just your imagination. With a simple financial tool called term insurance, this can be your reality. In addition to the protection it offers, there are also significant tax benefits of term insurance. This article aims to provide an understanding of how term insurance works and how you can leverage its tax benefits.

What is Term Insurance?

Term insurance is one of the simplest forms of life insurance that offers high coverage at relatively low premiums. The policy is designed to safeguard your loved ones by providing a lump-sum amount (a death benefit) if the policyholder passes away during the policy term.

Term insurance provides your family with a financial safety net, ensuring their financial needs are met. What’s more, this type of insurance often comes with added benefits like tax deductions, making it a popular choice among people seeking both protection and savings.

Tax Benefits of Term Insurance

One major advantage of term insurance is the array of tax benefits it offers. Learn about the term insurance tax benefit you can avail of:

Tax-deductible Premiums

The premiums you pay towards your term insurance are not just expenses but also investments that can save you money. According to Section 80C of the Indian Income Tax Act, the premium paid towards term insurance is eligible for a tax deduction. This means that the amount you pay as a premium can be subtracted from your gross total income, thus reducing your taxable income and consequently, your tax liability.

Tax-free Death Benefits

Another significant benefit of term insurance is that the death benefit is exempted from tax under Section 10(10D) of the Income Tax Act. This means that the full amount will go to your loved ones without any cuts or deductions, ensuring they get the maximum possible financial assistance in your absence.

Additional Benefits for Extra Riders

Term insurance policies often come with additional riders like critical illness cover, accidental death cover, or disability cover. These riders offer extra protection on top of your base policy, covering you against specific risks. The premiums you pay towards these riders are also eligible for tax deductions under Section 80D, adding another layer of tax benefit to your term insurance.

Leverage Tax Benefits

Having understood the tax benefits, let’s now focus on how you can leverage them:

Plan Your Investments

The first step to maximising your term insurance tax benefits is smart investment planning. Calculate your potential tax liability and see how much of it can be offset with a term insurance premium. This way, you can ensure that you are not over or under-investing and are utilising the tax benefits optimally.

Choose Riders Wisely

Term insurance riders are additional benefits that you can add to your insurance policy to enhance your coverage. When selecting these riders, it is important to choose wisely to ensure that you are getting the coverage you need.

Fine-tune the Coverage: First, consider your needs and the additional coverage you require. For example, if you have a family and dependents, you may want to consider a waiver of premium rider that ensures your policy will remain in force even if you become disabled and are unable to pay the premiums.

Assess the Benefits: Secondly, weigh the cost of the rider against the benefits it provides. Some riders could bump up the cost of your policy, so make sure that the cost is justified by the added coverage.

Study your Plan: Finally, read your policy’s fine print and make sure you understand the terms and conditions of each rider. Some riders may have exclusions, so be sure you understand what you are buying. By choosing riders wisely, you can have peace of mind knowing you have the coverage you need at a price that works.

Maintain Regular Premium Payments

Lastly, it’s vital to keep up with your premium payments. Tax benefits are only applicable if you maintain regular premium payments. Failing to pay your premiums can lead to your policy lapsing, causing you to lose both coverage and tax benefits. Setting up automatic payments or reminders can help you ensure that you never miss a premium payment.


Term insurance is a powerful tool that can offer you a double boon—financial protection for your loved ones and significant tax savings for you. By understanding how it works and how you can maximise the tax benefits, you can make strategic financial decisions that optimise your savings and ensure a secure future for your family. So, when you’re planning your investments, don’t overlook term insurance. It might just be the efficient financial tool that helps you strike the perfect balance between protection and savings.

Shehbaz Malik
Shehbaz Malik
A computer science graduate. Interested in emerging technological wonders that are making mankind more approachable to explore the universe. I truly believe that blockchain advancements will bring long-lasting revolutions in people’s lives. Being a blogger, I occasionally share my point of views regarding the user experience of digital products.

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