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How to Maximize the Benefits of a Term Insurance Policy Over Time?

February 21, 2025

Term insurance plans are a commonly chosen option for both financial security and tax benefits. Yet, it’s not that simple. Choosing the term insurance plan should not be followed by relaxing while paying premiums. Rather, being active and modifying the financial strategies as needed is essential to leverage the maximum benefit from the plan. Read on as we cover different points concerning this suggestion.

Methods to Obtain Maximum Benefits From Term Insurance Policy

The following tips must be kept in mind to receive maximum benefits from the term insurance policy over time:

Understand the Needs

It involves determining the right term insurance policy suitable for you. It is decided based on multiple factors such as present income, expenditures, expected increase in income in future and other crucial financial aspects. Current debts, loans and essential future expenses such as education and marriage costs or property buying costs must be considered when choosing a sustainable term insurance plan.

It will allow easy management of the insurance premiums. For instance, if you are looking for the best term plan for 1 crore, calculating premiums using a term plan premium calculator will offer insights into affordability and sustainability based on the mentioned types of expenditures.

Choose Suitable Tenure

The overall tenure plays a key role in determining the benefit a policyholder will receive. This tenure should be in alignment with your necessary financial expenditures and employment status.

Look For a Convertible Term Plan

Once you’ve chosen the right tenure, consider other options, like converting your term plan. Among the different options, choose the one that offers the flexibility to convert the term plan into a whole life or an endowment plan. It improves cash flow and finance management as per the monetary updates in life. Based on the finances, one can also proceed to choose the best term plan for 1 crore or go for conversion upto this value. Using a term plan premium calculator will be a wise decision to take for informed decision-making.

Choose to Obtain Riders

Riders refer to the optional add-ons in a term insurance policy. These are of different types and insured individuals include riders in their plans to gain extra coverage. Riders allow policy customisation as per their individual needs. Some of the examples of riders include:

-Critical illness rider that offers a lump sum if the policyholder is diagnosed with a critical illness

– Accidental death benefit rider offers additional payment on accidental death of the policyholder

– Long Term Care (LTC) rider allows monthly payments to policyholders if they need home care or are required to stay at a nursing home

– Waiver of premium rider that waives the premium for a specific period of time or in case of disability or inability to work

Obtain Tax Benefit

The policyholders can use term insurance plans to claim tax deductions. It is possible via section 80C of the Income Tax Act, which makes individuals eligible for tax deductions up to INR 1.5 lakhs per annum.

It is applicable if the policyholders are paying premiums. Additionally, the payout upon the policyholder’s death is tax-free. The stated benefit is available under Section 10(10D). Policyholders are recommended to make use of tools like term plan premium calculators to assess the financial impact of the benefits.

Understand Claim Process

Besides the self-understanding of the tax claim process, awareness among the beneficiaries is necessary, too. They must be aware of the tax-free nature of the received amount and the claim process. Also, they must be well aware of all the documents and the right individual to contact. Additionally, for the policyholder, the awareness of the maturity amount claiming process and timely claim of tax deductions is essential.

Extend the Policy

The end of the policy will subsequently end the premiums, taking away the opportunity to claim tax deductions. If the insured is employed, an extension of the term insurance plan can help you maximise the benefits. It is possible to choose the renewable term plan, which will increase policy duration by another term until the policyholder attains a specific age.

Consider Inflation

During the time of choosing the term insurance plan, be mindful of inflation. With the passing years, inflation is certain to impact the market. Assess future financial needs considering inflation and make appropriate calculations to identify if the maturity amount will be able to meet the requirements at that time.

The ability to do so will offer maximum value out of the regular premiums now. For instance, if you choose the best term plan for 1 crore in current times, it might be insufficient to cover the future financial needs of the beneficiaries.

Plan Policy Management

The financial changes with time can result in delays or payment lapses. This scenario can lead to paying higher premiums or resulting in the loss of policy. Avoiding such situations is very important. To ensure the practical possibility of the same, there is a need to plan beforehand, especially for low financial situations.

Remain Updated With Market Changes

The financial market is dynamic. Remaining updated with the changes helps you adjust the plans. Remember to leverage online tools, including term plan premium calculator, to make decisions. Further, combining the other investment options with flexible term insurance plans will help optimise the finances and enhance its management.

Conclusion

Term insurance plans offer effective financial security while contributing to tax savings as well. Policyholders can maximise the benefits by following the listed points. Also, when choosing the best term plan for 1 crore or any other plan, ensure to plan the finances by using the term plan premium calculator. Apart from these, we emphasise remaining updated with the changes in the tax regime. Additionally, communication with finance experts is necessary to make logical and informed decisions concerning investments and modifications in term insurance plans.

FAQs on Term Insurance Plans

Q1. What is the three-year rule for term insurance?

The three-year rule for term insurance is listed in the Insurance Act of 1938. It prohibits denial of insurance claims by the insurer on any ground after three years from the date of the policy’s commencement. It includes fraud and misrepresentation.

Q2. What happens if the nominee dies during term insurance?

If the nominee dies while the policyholder is alive, the nomination becomes ineffective. However, in case of the nominee’s death before receiving the death benefit, the amount is paid to legal heirs.

Q3. What happens if a person outlives their term insurance policy?

The fate of premiums depends on the policy. Generally, the living policyholder does not receive any benefit, as the policy provides finances only on the death of the insured. But, there also exists a term insurance plan that offers the return of premium.

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Octa Provides Expert Analysis for 2024 for Global Economic Trends and Gold Prices

March 22, 2024

New Delhi [India]: According to many analysts’ forecasts, the price of gold may increase in 2024. Octa explains in the article what factors will influence the dynamics of the gold price and what will happen to the market this year.

Gold is trading above $2,000 per ounce in early 2024. Analysts expect that even later in the year, gold prices may remain above $2,000 per ounce, reaching new historical highs. Among the factors favouring this are geopolitical uncertainty, the likely weakening of the U.S. dollar, and potential interest rate cuts. But before relying on these factors in the future, we must understand how they have influenced the past.

A new scenario of gold price dynamics

For the past 90 years, the value of gold has depended primarily on the volume of transactions between the Western and Eastern markets. Western countries determined supply and demand, while Eastern countries acted as counterparties to the transaction. Thus, when the volumes of physical gold purchased by Great Britain or Switzerland increased, its price grew, and vice versa. As a result, gold moved from the West to the East and back synchronously with the price decreasing or increasing.

The second factor that has historically influenced the price is the relationship between the price of gold and the real yield on U.S. government bonds. When the real yield decreased, bonds lost their appeal, and investors moved into gold. Once the trend reversed and real yields began to rise, investors returned to bonds.

However, since the end of 2022, both patterns have failed. The U.S. ten-year bond yield rose to 4.33%, above the 2022 highs, beating a 15-year record. Despite expectations, this didn’t lower the price of gold, which instead rose from November 2022 to August 2023 by 16%, from $1,643 to $1,954 per ounce.

The correlation between gold transaction volumes and the gold price also stopped working. Since the third quarter of 2022, the UK and Switzerland have been Netto-exporters of gold, i.e. sellers. According to the historical paradigm, this should also have been a reason for the price of gold to fall. However, as we can see, this is not happening. Thus, the West has not significantly influenced the pricing of precious metals.

What affects gold in 2024?

Escalating geopolitical conflicts are causing gold to rise in value. Due to the geopolitical events of 2022, dollar assets have become more risky for many countries. Central banks in the Global South, Eastern Europe, and the Middle East have been actively pursuing a policy of building up the gold part of foreign exchange reserves since the end of 2022. According to a World Gold Council (WGC) report, central banks bought 800 tonnes of gold in the first nine months of 2023, up 14% year-on-year. Excess demand from central banks has boosted the value of gold by 10 per cent in 2023.

‘It is the central banks’ purchases of gold that will act as the main driver of growth in 2024′, said Kar Yong Ang, the Octa financial market analyst. ‘If the trend continues and the level of gold reserves moves towards an average of 40% of the gold composition in reserves, that would mean an additional $3.2 trillion in the asset–a 25% rise in 2025, which would correspond to a price of $2,500 an ounce’, he added.

Gold has also seen another rise since the beginning of the Palestinian-Israeli conflict: since October 2023, it has added more than 8%. Hence, we can conclude that any aggravation in geopolitics will have a positive impact on gold.

The stabilisation of inflation will continue to support gold quotes. In 2022, global inflation reached its highest levels in decades. However, it is also a fact that inflation passed its peak at the end of 2023. Most analysts believe inflationary pressures will continue to ease in 2024.

‘Traditionally, the gold price has been negatively correlated with the inflation rate. The lower the inflation rate, the lower the interest rates on government bonds. As a result, the relative attractiveness of non-interest-bearing assets such as gold increases’, said Kar Yong Ang.

Developing economies de-dollarisation. Investors see gold as an alternative means of building savings and protection against inflation and currency risk. Demand for gold is increasing because Brazil, Russia, India, and China (members of BRICKS) seek ways to improve their currency independence.

The main factors affecting gold’s price are inflation, rising demand from central banks, de-dollarisation of developing economies, microeconomic situation, and geopolitics. The combination of these factors will create conditions for the growth of gold price in 2024–in the first half of the year, the cost of the precious metal may exceed $2,200 per troy ounce. In the second half of the year, the upward trend in gold is likely to continue, and gold may show a price of $2,300 per ounce, so the average price in 2024 will be $2,170.

Octa is an international broker that has been providing online trading services worldwide since 2011. It offers commission-free access to financial markets and various services already utilised by clients from 180 countries with more than 42 million trading accounts. Free educational webinars, articles, and analytical tools they provide help clients reach their investment goals.

The company is involved in a comprehensive network of charitable and humanitarian initiatives, including the improvement of educational infrastructure and short-notice relief projects supporting local communities.

Octa has also won more than 70 awards since its foundation, including the ‘Best Educational Broker 2023’ award from Global Forex Awards and the ‘Best Global Broker Asia 2022’ award from International Business Magazine.