Life insurance can prevent the burden of your loan EMI on your family

Loans have become a common part of everyone’s lives. Just as a house, a car, a trendy mobile phone, and other things have become a necessity, a loan is often used to pay for these necessities. When you avail of a loan you are required to pay it off within a specified duration. You, therefore, plan your budget in such a way that you are able to pay off the loan within the specified duration. But what if you face premature death? Who would pay off the loan then?

In case of the death of the borrower, the loan burden shifts to his family. Thus, in case of your premature demise, your family would have to pay the loan EMI to pay off your debt. Besides suffering a loss of income on your death, your family would face an additional credit burden which might land them in a financial crisis. Can this crisis be handled?

Yes, it can be. You can buy a life insurance policy to take care of your loan burden in case of your sudden demise. Life insurance plans primarily cover the risk of premature death. In case of death of the insured, a death benefit is paid to the family which helps them manage their financial problems. Thus, if you buy a life insurance policy, the financial crisis faced by your family in your absence can be avoided through the death benefit paid by the policy.

When it comes to life insurance, a term plan policy is the best way to cover your liabilities in your absence. A term plan policy is the most basic form of life insurance that covers the risk of premature death. This is a pure protection plan which costs very less and allows you to opt for a high sum assured. When you choose a high term insurance cover, your family gets sufficient financial assistance to meet their financial needs and also pay off any outstanding loan that you have left behind. High term insurance cover, therefore, provides financial security to your family and takes care of your loan EMIs. 

Other benefits of a term insurance plan include the following –

1. Since the premium of the policy is low, you can easily afford to opt for a high term insurance cover. This high cover ensures complete financial protection for your family in your absence. Moreover, the low premiums are also affordable on your pockets making you able to continue the coverage without any strain.
2. Nowadays, a term plan policy offers a wide range of coverage benefits including inbuilt rider benefits. Thus, the plan not only allows coverage against premature death, it also covers other contingencies which you might suffer and provides financial assistance in such contingencies. For instance, if the plan has an inbuilt critical illness rider, a range of illnesses are covered and if you are diagnosed with a covered illness, a lump sum benefit is paid by the policy
3. Term plans also allow coverage for a longer tenure which can go up to 99 or 100 years of age. Thus, you are assured of longer coverage 
4. There are specific mortgage redemption term insurance plans which exclusively cover your liabilities. In case of premature death, the outstanding balance of  the loan is paid off by the plan avoiding the loan burden to fall on your family
5. Term plans also help you in saving tax. The premiums paid for the policy are allowed as a deduction from your taxable income. You can claim a deduction of up to INR 1.5 lakhs under the provisions of Section 80C of the Income Tax Act, 1961. The benefit paid by the plan is also allowed as a tax-free income for your family thereby giving them a higher corpus for their financial needs.

Life insurance policies, especially term plans, are, therefore, an ideal way to cover your outstanding liabilities so that your family gets to live a debt-free life in your absence. So, invest in a suitable life insurance plan, with an optimal coverage level, so that your loan EMIs can be met with the plan’s benefits if you are not around.