Handy Guide to Buying Convertible Term Insurance Plan

For any individual, the family is the most valuable possession in life. As a responsible person, you must ensure that your family is financially secured against all odds of life. This is the reason why you should opt for the Convertible Term Insurance .

It is a plan where you have the leverage to convert the existing policy into an endowment assurance plan, a type of life insurance policy. This enables you to get a double benefit – life insurance coverage and savings.In the case of Convertible Term Insurance , the insurer pays the sum assured in a lump sum at the time of demise or on maturity. To convert the policy, the policyholder has to initiate the process as it is not converted automatically.If you’re buying this type of plan, you need to consider the following key pointers:

1. Availability: Convertible Term Insurance Policy is not easily accessible in the market as the market is flooded with many types of insurance plans.
2. Premiums: The rate of premium is high as compared to the regular term insurance policy. The reason for charging a high premium is the maturity benefit equates the sum assured amount if the policyholder opts for conversion alternative.
3. Conversion: The timing of choosing the convert the policy also matters. It is always recommended that you choose conversion when you’re close to the maturity date.

What are the Features of Convertible Term Insurance Plans?

1. The premium amount is decided at the start of the policy, and it remains the same, even after conversion.
2. If you switch term insurance into an endowment plan, you are entitled to receive the maturity benefit.
3. The convertible term insurance plan offers tax benefits. You can claim tax deductions up to Rs 1.5 lakh against the premiums paid for the policy under Section 80C of the ITA. Besides, the maturity benefit is also entitled to tax exemption under Section 10(10D)

You might be wondering whether the Convertible Term Insurance Policy is beneficial or not. If you’re looking for a policy that offers optimal life insurance coverage along with maturity benefit/savings, then it is best to opt for the policy.As against the Term Insurance Return of Premium Policy wherein the insurer compensates the entire premium at the time of maturity, the Convertible Term Insurance Policy is a good option as you obtain double benefits in a policy. Moreover, it is easy to opt for conversion at the time of maturity.

If you’re interested in buying the Convertible Term Insurance Plan, make sure you are aware of the features, benefits, premium rates, and conversion conditions.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.