How to Achieve Financial Security with Term Insurance?
- Updated on :
- July 31, 2023
- 7:00 am
“You can’t put a price on life, but you can invest in the promise of a sound financial future.”
Food, shelter, clothing, health, and education — these are often considered the basic necessities of the quintessential modern life; however, people forget to include an essential aspect that is often underrated: security. There are many ways to guarantee your and your loved ones’ safety, you can hire a watchman or install CCTV cameras at your door. But when it comes to financial security, there is perhaps no other measure more effective than term insurance. So, let us understand exactly what term insurance is.
What is Term Insurance?
More than a watchdog, term insurance is an investment that pays its returns through the peace of mind your family can experience in the event of your unexpected demise. The main idea behind term insurance, also known as life insurance, is that life can be unexpected and it’s always better to be safe than sorry. By paying a small sum today, you can ensure that no matter what happens, your loved ones will never have to give up on their dreams.
Term insurance usually consists of some common components, which are as follows:
- Sum Assured: Also known as the death benefit, sum assured is the amount your family will receive upon your passing. In case of a term insurance plan, this sum is usually large and in India, it can range from tens of lakhs to even crores of rupees.
- Term Length: The term length determines the latent period of your insurance plan. Say, for example, that the term length of your term insurance plan is 20 years. If anything was to happen to you within the 20 years outlined, your family will receive the entirety of the sum assured.
- Premiums: The magic of term insurance premiums is that in as little as Rs. 780 a month, you can get a sum assured of at least Rs. 1 crore, or possibly more! You can use a term life insurance calculator to know the premium you are eligible for.
Benefits of Term Insurance
In India, around less than 32% of the population has invested in a term insurance plan. However, this percentage is only and for good reason.
1. Super affordable
The inherent nature of term insurance is that anyone who want to safeguard the financial future of their family can access it. Therefore, term insurance premiums are very low despite offering substantial coverage.
2. Tax benefits
According to the Income Tax Act, 1961, term insurance plan is eligible for a tax deduction of up to Rs. 1.5 lakhs in a given financial year. So, not only can you rest assured that you are financially secure but also experience the mental peace that comes with knowing that your term insurance is also decreasing your tax commitment, helping you to save more.
3. Endless options
Term insurance is widely available throughout and outside India. So as a consumer, you can conduct thorough research to choose a term insurance provider and plan that perfectly suits your insurance preferences.
4. Choose your own coverage
Another perk of term insurance nowadays is that you can pick and choose your own terms as you want. From the death benefit to the monthly premium and even add-ons like critical illness rider or income protection, you can mix-and-match your term insurance policy to your circumstances.
How to Choose the Right Insurance Plans?
Considering all the options and customisations available, as mentioned above, how does one choose a term insurance plan that is perfect for them? It’s easy, consider the following factors to understand and determine which is the best term life insurance plan for you.
Your age
Age plays a big role in determining your term insurance plan preferences. For example, if you are in your early 30s, you can choose a long-term plan that caters to your needs like ensuring the education of your children goes unhindered or your spouse can pay off the home loan without any financial burden.
Your health
It is a thumb rule that term insurance is cheaper for those with sound health. So, if you are prone to smoking or have a chronic health issue, you should include a health rider In your term insurance plan.
Your family
Consider how many dependents you have. If you have children, ensure that all of their educational aspirations can be met with the death benefit that you choose. Depending on the number of your family members, you can calculate and customize the term insurance plan that serves all.
Your income
Another important aspect to take into account is your income. Can you pay the term insurance premium for years upon years without having to worry? Choose your premium accordingly. Remember that the financial future of your loved ones should not come at the price of your present mental peace.
Busting Myths About Term Insurance
If you have decided to invest in a term insurance plan, you may get to hear a lot of misconceptions regarding the same. It is important to understand why these myths exist and why they are what they are- unfounded:
“Term insurance isn’t worth it”: If you cannot, even for a minute, stand the thought of your children giving up their education because it is no longer affordable or your spouse being overburdened or stressed with financial problems, then term insurance is simply a necessity. Like salt or water, it is essential for life and worth every penny it costs.
“Term insurance is only for those worried about dying young”: Even at the age of 55, individuals are eligible for term insurance that is affordable and long-lasting. Therefore, there is simply no logic behind assuming that you need term insurance only if you are expecting to meet your demise at a younger age.
“Health insurance is better than term insurance”: Health insurance is completely separate from term insurance and offers benefits only to you if you face any medical problems. However, term insurance is only for your family and has a more comprehensive approach.
Conclusion
It is often said that, in life only two things are certain, death and taxes. Well, with term insurance, you can make your demise easier for your family and loved ones to grapple with while saving on taxes at the same time.
AMIT ARORA
