Using Your Office Bonus to Buy Term Insurance
When you make an investment, every penny counts. Therefore, making good use of any surplus money or the money in hand is crucial. So, if you have just gotten lucky and have got a bonus from your office, you may be thinking of how to use it. You are, of course, entitled to have some fun with this hard-earned money, but at the same time, spending the entire bonus on travelling and shopping might not be the best idea.
The aim is to use that money wisely. While investing is crucial, you also need to pay attention to something that is the foundation of every financial plan, and that is life insurance. If you have a family, you need to keep them safe, even when you are no longer around. This year, why not take a step toward securing your family’s financial well-being, and safeguarding them from the mishaps in life?
Investing in a Term Plan
A great way to invest this money can be by buying a term plan. In a simple and affordable way, you can ensure that even if something happens to you tomorrow, your family could not be in a financial crisis. A term plan is considered to be an efficient financial tool. It is cost-effective and very easy to understand.
The bonus that you have received can be used to buy a single premium term plan. A single premium plan offers the same benefits as a regular term plan. Here, rather than paying premiums regularly, you can get the required coverage by paying a lump sum amount.
Benefits of a Single Premium Term Plan
The financial decisions that you make today will affect your and your family’s future. Let us discuss how using the office bonus to buy term insurance can be a very wise thing to do.
Convenience and Policy Lapse
Missing a premium payment can put you at risk of a policy lapse. However, you can completely avoid this worry, as your coverage is already paid for.
Affordability
As you are paying the entire premium upfront, the term plan comes out to be a more reasonable deal. You avoid the interests and the fee and charges that may be applicable when you pay premiums over a specified term.
Better for Your Beneficiaries
Buying a term plan with regular premiums can be an issue, especially if you are unable to pay them. If you are unsure of being able to pay the premiums in the future, it is highly advisable that you use your office bonus to buy a single premium term plan. You would thus be able to ensure that your family does not suffer and gets the payout immediately without having to wait.
Tax Benefits
When you invest in a lump sum amount, you can avail up to ₹1.5 lakhs as tax deduction under Section 80C of the IT Act. If you opt for a critical illness add-on/cover, you can also avail of ₹25,000 under Section 80D. Note: When you claim your deduction under Section 80C, keep in mind that the premium being paid is below 10% of the sum assured to get a full deduction, else only 10% of the sum assured would qualify for the 80C deductions. Apart from this, under Section 10(10D) the death benefit that the nominee receives would be tax-free.
Why Choose a Term Plan?
Regular premium, limited pay premium, or single premium, no matter what option you choose, what is most important here is that you choose a term plan. A term insurance plan offers financial protection to your family, in case of your passing away. If you are an earning member, having life insurance becomes all the more important.
Having surplus money in hand, you may want to opt for a product that offers some insurance along with returns. But buying a product that offers neither adequate coverage nor the best returns can be a major howler. Plans that offer investment as well as protection may levy commissions as well as charges, and may not be as transparent as a term plan. According to some financial experts, an investor should keep investment and insurance separate. Looking at your insurance plan as a source of investment might not be the best thing to do.
A term plan is a pure protection plan that can give you the highest coverage at the lowest possible cost, as there is no element of investment. You can, therefore, manage the financial risk of the loss of an earning family member. Once you fulfill your responsibility of securing your family’s future, you can think of building your investment portfolio, depending on your requirements and your risk-taking capacity.
Remember to Enjoy Life
While investing and securing the future is essential, life is not just about saving. Do keep a portion of the bonus to enjoy with your loved ones. Take a break from work, plan a holiday, or go out for a family dinner. No matter what the future has in store, the loving memories you all make together will always be cherished.