Secure Your Family With Term Insurance
Life insurance is meant to provide your dependents with
enough money to replace your income in case you are not there. For an earning
member it is a foremost responsibility to have adequate life cover as if
something unfortunate happens to him then his family should not be left in
distress.
Term insurance is the best form of life insurance as it
gives a very high cover at a very low price. The premium of a term insurance
plan is a fraction of what you have to shell out for an endowment plan, a money
back policy or a unit-linked insurance plan (ULIP) for the same coverage. This
is because there is no investment component in a term insurance plan and entire
premium goes for covering the risk. So if the policyholder dies during the
insured term, the death benefit is paid to the nominee. There is no survival or
maturity benefit once the policy term expires.
Term plans are specifically designed to secure your family
needs in case of death or uncertainty.
There are two common mistakes when it comes to buying life
insurance. Firstly, people don’t act at the right time and secondly when they
realize their mistake, they buy too much insurance.
It is always advisable that as soon as you start earning you
must start your insurance planning by buying term insurance plan. You must buy
term insurance as early as possible as you can lock it at cheaper price. The
early you buy a term insurance plan, the cheaper it is.
You must neither be over insured nor under insured. If the
life cover is inadequate, it defeats the whole purpose of insurance and if you
take too much insurance then it becomes the matter of affordability.
While deciding how much cover you need, you must take into
consideration certain things such as the basic expenditure that your family
will incur major expenses like marriage of children and other liabilities like
loans. You must reassess your life insurance needs after each important
milestone in your life. Failing to upgrade your life insurance cover over time
could mean that something unfortunate happens to you; your family may not have
enough funds to pay for the child’s education, the home loan EMI and other
household expenses. Hence, it is important to upgrade your sum assured to cover
the additional costs. It is particularly important to be able to provide debt
cover when borrowings increase.
The tenure of a term insurance plan is almost as important
as the amount of cover. Ideally, an insurance policy should cover person till
the age he intends to work.
You can also buy more than one term insurance plan. You can
configure tenures of your term insurance plans in a way that they match your
financial goals. Whenever a financial goal is achieved, the corresponding term
plan terminates.
While deciding on how much life cover you need, remember to
factor in inflation. The amount that you think sufficient now may not be
sufficient after few years. For this, some companies offer plans where the
cover increases by certain percentage every year. As your sum assured would
automatically increase in the coming years, it would take care of increase in
your income as well as inflation.
In these policies, the cover increases with time to hedge
against inflation. One doesn’t need to buy more insurance later in life as
responsibilities grow.
Online term insurance plans is the best way to buy a term insurance plan. Online term plans are roughly
30-40% cheaper than offline policies. This is because there is no intermediary
and the online buyer is perceived as low risk customer.
Premium paid for term insurance policies are exempted from
tax under Section 80C of Income Tax Act, 1961. The claim amount received by the
nominees is tax-free under Section 10 (10D) of Income Tax Act.
There is no monetary value for peace of mind. For everything
else, do take a term insurance plan.
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