Term insurance plans are the simplest and most popular form of insurance in India. Term policies are infact a necessity for individuals who have dependents or a family. But ask the younger working population about insurance and the answer you get is – insurance is for older people, not us.With the youth focused on enjoying life to the fullest, future financial security seems to be something that needs to be taken care of in almost another lifetime!
What these youngsters don’t realize that the earlier they start, the better it will be in the long run because the one thing that is certain but completely unpredictable in life is death.Term life insurance is a highly useful tool, as it offers financial protection to the family of the policy holder in case of his sudden demise.
Under such a policy, which is a pure risk product, you have an option to choose a specific term during which you pay the premium and in case the policy holder dies during this period, your family gets the pre-decided lump sum amount or monthly fixed payments for a pre-specified tenure. However, if the policyholder outlives the period of the policy, there are no maturity benefits. The benefit you get is that you have to pay relatively lower premiums but the return is almost equal to a traditional life insurance policy. You can check out the premiums you would need to pay with an easy to use term insurance premium calculator. Read on to know more about why and when to buy a term plan.
Death is Inevitable
We all know that death is inevitable and it can only be delayed by following a healthy life style and adopting good eating habits. Since it cannot be avoided- we need to be prepared for what is going to happen after that- especially the financial impact. Apart from the emotional impact, the death of an earning member is bound to leave a huge financial gap in the lives of his surviving family or dependents. Taking term insurance can help remove the economic uncertainty that may arise after the death of an earning member of a family,
Buy Term Insurance for Peace of Mind
Term insurance is most popular product, mainly because it is simple.It is a policy wherein the policy holder has to pay a fixed amount of premium every year to the insurance company, which in turn agrees to pay a pre-determined amount to the policy holder’s family in case of his demise. Since nothing is paid out in case the policy holder outlives the policy term, one may think that taking this is a raw deal for you. However, being a pure vanilla product, offering a large sum assured at very reasonable premiums, you actually get complete peace of mind without having to spend too much.
So any working person who is the sole earner or contributes significantly to the finances of his/her family should opt for a term plan to safeguard against any type of financial problems after his/her death. And the earlier you start the better. Starting early means the premium is likely to be significantly low besides allowing you the satisfaction of knowing that you have adequate financial protection for your parents or children or both, if something happens to you.
These plans can be bought by anybody between the ages of 18 to 60 or 65 years (depending on your retirement age). But the decision to buy such plans should be taken keeping in mind your income, number of dependents, their future needs, existing liabilities and inflation. The later you buy a policy, the higher the premium is likely to get, since your liabilities and responsibilities will also be higher at this stage.
Term insurance is also not recommended at an age when you have met all your responsibilities, your children are also settled and working independently and you have no financial liabilities. Life insurance plans with additional benefits are more apt for you at this age.
The Benefits of Starting Early
The premiums are quite low when you start early as your family responsibilities are less and so are the financial liabilities, such as car loans or home loans. In fact, the premiums at this stage are so low that they will not have any significant impact on your budget and other expenses.
As a person ages, he/she may take loans for a car or home, which increases the financial liabilities. This also increases the need for having some financial stability for the family, in case of your sudden death. The death benefit received from the insurance company can be used to repay these loans, besides providing some financial security to the family.
The amount of term cover that you wish to have will depend on your current income and the financial liabilities you have. Since you wish to ensure that your family does not face any financial difficulties after your death, you need to choose a sum assured that is adequate to cover their basic expenses and liabilities.Apart from this, you also need to take inflation into account. A plan amount that looks good today may not be adequate after 10 or 20 years, so always factor in inflation into the calculations. The process of calculations has been made much simpler with the availability of term insurance premium calculators online. All you need to do is feed in the required information, and the calculator will do the rest for you.