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Term Insurance 1563 views November 18, 2018
While there are a lot of life insurance plans available in the market, convertible term insurance is gaining increasing popularity among those seeking more benefits than what an average term insurance plan offers.
To understand the benefits inherent in a convertible term insurance plan, it is important they understand the concept of convertible term insurance. Convertible term insurance plans come with an in-built feature that allows the plan to be converted into an endowment plan. This conversion option comes as an add-on feature. The policyholders can avail this feature by paying an additional premium amount. Be it an inbuilt coverage feature or an add-on option available on payment of extra premiums, the conversion feature gets activated only after a formal request made by the policyholder to the insurer, which means that the conversion option is not triggered automatically. If the policyholder does not exercise the option or fails to exercise the option owing to some reason, then the plan would continue to operate as any level term insurance plan.
One of the biggest benefits of convertible term insurance is that the premium charges continue to remain the same even after the policyholder activates the conversion option. The premium amounts are originally evaluated on the basis of age, amount of sum assured, policy period and premium paying term of the plan. Premium charges are determined at the outset and continue unchanged throughout the entire premium paying period.
Rider benefits are available subject to payment of additional premium amounts. The common riders available are Accidental Death and Disability Benefit Rider, Critical or Terminal Illness Rider, Waiver of Premium Rider, etc.
Tax benefits are the same as in level term insurance plans. While the premiums charged are eligible for tax deduction under Section 80C of the Income Tax Act, the amount of sum assured obtained at the end of the policy is exempt from tax deduction under Section 10(10)D of the Income Tax Act, 1961.