What are the Similar Key Features of Term Insurance and Health Insurance Plans in India?

4 Similar Key Features between Term and Health Insurance Policies

1. Financial Coverage

You can never predict when life will throw you a curveball. Life is unpredictable, which is why it’s important for everyone to have some type of protection plan in place. Term insurance plans and health insurance plans provide financial assistance during tough times. The former provides financial aid to your family in case of your unfortunate death while the latter provides coverage when you suffer from a serious illness.

2. Surrender Option

Both insurance policies provide a surrender option, which is an agreement between the insurer and the policyholder to allow for early termination of the contract. The surrender money is paid after deducting a surrender load, which varies from one insurer to the next. However, the sum is generally less than the amount paid in premiums.

3. Add-on Coverage

Term and Health Insurance Plans both allow customers to enhance the coverage of the basic plan by adding riders or add-ons to the plan. It’s a great way of increasing coverage of a standard plan by paying a little more premium amount.

4. Tax Exemption on Premiums

Premiums paid for both term and health insurance plans qualify for an exemption of Income Tax but under different sections. Section 80C provides tax exemptions on term life insurance premiums provided the annual premium amount is less than 10% of the gross sum assured and upto a maximum amount of INR 1.5 lakhs a year. In term plans, the death benefit is also tax-free in the hands of the nominee.

Whereas, Section 80D provides tax exemption on premiums paid on health insurance plans upto INR 25,000 for premium paid towards self, spouse and dependent children. There is an additional benefit of INR 25,000 for health insurance premium paid for parents, which enhances to INR 50,000 if either of them are more than 60 years of age.