Unpredictability is the very essence of life. So, it is best to stay as prepared as possible to avoid unfavourable circumstances related to finances. Investing in the right term insurance plan can aid you in covering extensive grounds to secure the financial future of your family.
Term insurance plans are pure life insurance plans, offering a death benefit to the designated nominee or beneficiary in the absence of the insured-cum-policyholder. However, if you outlive the policy, there are no maturity benefits.
It is one of the most cost-effective solutions allowing extensive coverage to your beloved dependent family members, during challenging situations.
Importance of term insurance
The reasons for choosing term insurance plans to ensure the financial future of your family include the following:
- Financial security:
Term insurance plans act as a reliable financial safety net, ensuring the beneficiaries or nominees receive the lump sum death benefit payout during a mishap.
- Peace of mind:
Once you are assured that your beloved family members are financially protected despite your absence, it allows you to enjoy your peace of mind and helps you focus on other aspects of life better.
- Affordable coverage:
Term plans usually offer comparatively high coverage at a considerably lower cost when compared to other types of life insurance products.
- Flexibility:
Usually, term plans allow you the flexibility to choose the plan duration and make necessary adjustments with evolving requirements.
- Tax benefits:
Term insurance plans offer tax benefits u/s 80C of the IT Act of 1961. Moreover, the death benefit remains tax-free u/s 10(10D).
- Protection for dependent(s):
In the event of the death of the policyholder-cum-insured, the nominees or beneficiaries can utilise the death benefit amount to repay outstanding debts, handle family expenses, fund children’s education, etc.
- Financial stability:
The death benefit payout from a term plan can help the concerned family to maintain their living standards and help them to avoid struggling circumstances.
Why is term insurance essential?
A reliable term insurance aids you in taking care of your beloved family members and ensures their financial security during unfortunate circumstances. It is a safe choice that allows extensive coverage in comparatively lower premiums.
Factors to consider while buying a term plan for your growing family
While purchasing a term plan, you must consider these factors to make your choice foolproof:
- Coverage amount:
- HLV calculation: Calculate your HLV or Human Life Value by assessing the potential financial losses that your family members have to face in your absence.
- Financial liabilities: Consider all liabilities, like outstanding loans, debts, mortgages, and future expenses.
- Sufficient coverage: After considering all these, opt for a sufficient coverage amount to handle all the financial requirements of your family. You can consider choosing a 2-crore term insurance.
- Plan term:
- Plan duration: This must be in sync with your life stage and financial goals.
- Retirement plans: Ideally, your term plan must extend till your retirement age.
- Adequate coverage: Do not fall for overly short-term plans that will prove to be insufficient.
- Insurer:
- Research and compare: Before zeroing in on any particular insurer, research and compare all competent companies, considering promising CSR.
- CSR: This is a major determinant of the company’s ability to settle claims promptly.
- Premium:
- Premium cost: Consider your financial status so that you can smoothly pay out the premiums throughout the term without any burden.
- Factors affecting premiums: Your age, health, lifestyle choices, etc., directly affect the premium payable amount.
- Compare: Compare various plans and insurers to know which one is offering the best coverage at the most affordable rate, considering your circumstances.
- Riders:
- Explore: Since not all insurance companies offer all sorts of riders, you must explore the market well. Some popular riders include a critical illness rider, an accidental death benefit rider, etc.
- Consider your needs: Though riders enhance the coverage extent of the basic plan, you must be critical in choosing them. You have to pay additional premiums for every rider you choose. It is not desirable to instil unnecessary financial drainage while ensuring financial security.
- Offline vs. online:
- Online: These days, online purchases are comparatively more popular due to their speed, minimal paperwork and zero involvement of any third-party agent.
- Offline: You can visit the nearest office of your chosen insurer and then proceed following the necessary protocol.
- Understand the plan
- Terms and conditions: Whichever plan you choose, you must be aware of all the terms and conditions, inclusions, exclusions, coverage, etc., to avoid any misunderstandings.
- Free lock period: Usually, term plans offer a free lock period during which you can cancel the plan in the case of any dissatisfaction without any charge.
Conclusion
The importance of term insurance plans cannot be exaggerated. To ensure the financial security of your family, you must consider investing in term plans.
