Many people ignore taking a life insurance policy in early stages of their career. Many young people buy their first life insurance policy only after they have children. Life insurance protects your dependents from financial distress in the event of your unfortunate death. You should understand that your dependents are not just your spouse and children. For example, if you provide financial support to your parents, then your parents are your dependents even if you are single.
When do you need life insurance?
Protecting financial future of your family is your prime responsibility if the family members are dependent on you. However, even if you are single, and assuming that, your parents or other family members are not financially dependent on you, you still need life insurance.
Now, let us see the situations when it is prudent to have life insurance?
- You are engaged to someone or plan to get married and start a family in the near future.
- You are working couples with no children and you think your current incomes are sufficient to take care of you and your dependent’s financial needs. But what if you plan to have children in the future; life insurance is a critical priority.
- If your parents are working, then they are probably not financially dependent on you. But if they retire in the near term and become financially dependent on you, then you will need life insurance.
- Even if your senior citizen parents are not financially dependent on you, a serious illness requiring long term hospitalization can erode a significant portion of their savings. If your parents are dependent on income from their investments, their cash-flows may be affected after a serious illness and they may have to depend on you. How you are going to provide them financial protection, should anything happen to you.
- If you have sibling who is disabled or very young and currently dependent on your parents, but in the future may be dependent on you, how you are going to financially protect his or her, should anything happen to you.
The above are some of the typical situations which suggest that you must have life insurance to protect your dependents and family members from situations arising out of your unfortunate death. Please note that even if you do not have financial dependents now but expect to have dependents in the future, you should pro-actively buy life insurance policies to protect the financial future of your prospective dependents.
There are various types of life insurance policies serving different purposes of life. But when it comes to financially protect your dependents and family members then you need to have a policy which will solely serve this purpose. Therefore, you must have Term Life Insurance plans in order to protect the financial future of your family.
What is Term Life Insurance Plan?
Term Life Insurance plan is the most basic and important Insurance Plan for an individual. Term Insurance Plans are basically ‘no jargon attached’ protection plans and designed to protect your family against unforeseen circumstances arising due to your sudden death by providing them financial security. It is the most recommended Life Insurance Plan by financial experts and planners.
Benefits of a Term Life Insurance Plan
Let us now see what are the benefits of a term life insurance plan and why it is the must have for protecting your family.
Lowest premium – These plans allow you to have a very high cover or the highest life cover in lieu of a very low premium. This is possible because unlike other insurance plans, the term plan is a pure protection plan with no ancillary benefits attached to it. If you compare the premiums of term plan policies with any of the traditional plans, you will always find that the term insurance plan premiums are the cheapest.
Lower tenure – Normally Term Insurance Plans are taken for the highest possible tenure offered in a policy as you will always have some responsibility towards protecting your family till the last breadth of yours. However, the terms plans can be taken for shorter tenure also. For example – you are aged 28 and have taken a home loan of 50 Lakhs for 20 years. In that case, you can take a term insurance plan of 50 Lakhs for 20 years tenure, for this purpose only, so as to ensure that if something happens to you during the loan period, your family will be able to retain the house.
Longer tenure – Term plans can be taken for a long period of time as we know. Generally the term insurance plans can be taken upto the age of 70 but some companies allow life cover even upto age 75. With growing life expectancy rate in India, it make sense for you to take the life cover till age 70-75, if you think you will have some family members dependent on you even at that age of yours.
Fixed premium – Once the Insurance Company accepts your term plan policy against a certain premium (you might have to undergo a medical test in case of a very high cover or you are very aged as per the policy term), it will never revise or change the premium during the policy tenure till you survive or the end of the policy term.
Highest life cover – Through term insurance plan you can take the highest life cover. No other life insurance policy and plan can provide you as high a cover as provided by a term plan. Currently in India, the highest term plan cover offered by a life insurance company is Rs 100 Crores.
Continuation of policy – It may so happen that you are unable to pay premiums in time or due to financial difficulties may even have to discontinue paying the premiums after continuing the policy for few years. In that case, you can make the term plan ‘paid up’. This feature allows the policy to continue but of course with limited life cover. Normally the life cover of the policy holder reduces with the proportion of premium paid till ‘paid up’ status of the policy.
Starting early benefits – Like other insurance plans, the premium of term plan also depends on your age and the term of the policy. If you are young and the policy term higher, then the premium will be the lowest. Therefore, if you take a term plan at an early age of your working career then you can get a bigger cover by paying a smaller premium.
Peace of mind – If you have taken term plans after evaluating all financial needs and responsibilities of your family and dependent, then you can really have a peace of mind. The utmost important things in your life are protecting your family financially from unseen events and provide them with financial security. When a term plan takes care of that, naturally you will have peace of mind and can lead a relaxed life.
Income Tax Benefits – The benefits of term plans have not yet ended. You can avail a tax benefit too on the premiums paid upto Rs. 150,000 per annum (under current Budget provisions) under Section 80C of the Income Tax Act 1961. Along with the Section 80C benefits, the maturity benefits paid (in case of term plans with return of premium) and also the claim benefits paid to family members (in case of your death) is also tax free under Section 10 (10D) of the income Tax Act 1961.
We have seen how term life insurance plans are the only plan which can fully protect the financial future of your family. Due to increasing awareness, the term plans appeal to most of us due to its inherent benefit of high life cover at the lowest possible premium added with the Income Tax Benefits and ultimately for the peace of mind that comes attached with it.
The premium you pay is a small price compared to the benefits that the family might have to avail in case you of your sudden death. While you might be attracted to the unparalleled benefits and importance of having term insurance plans, but you must first assess the various financial responsibilities and liabilities of the family that might arise in case of death of the sole bread earner. So without waiting any further, choose a term plan suitable to you and secure the financial future of your family!