Why term plan is a must in your basket of investment?

In life we strive to get some sort of financial security that will take care of our family’s future needs. While market is flooded with financial products one such product that blossoms around all the seasons across is “Term Insurance Plan”. A simple and straight forward protection plan term insurance offers the desired coverage to fulfill your family needs if anything uncertain happens to you during the coverage term. Not only does it aid your family during crisis, but also if taken smartly it helps in clearing all the existing debt, takes care of your children education needs, invest for their business etc.

Today, term insurance is one of the most important life insurance forms as it gives strong financial support for a defined time span. It provides the necessary financial stability to the insured’s family. Death benefit is received by the nominee who is generally a family member. Policyholder can select to receive a lump sum amount of mix of monthly payment and lump sum amount based on insured’s needs. In India nearly all life insurance companies have term plans in their bouquet of offerings. The rates are also quite competitive. Based on your relation with the sales person and the previous experience with the company, you go for a suitable term plan. These plans are no frills products that give us very high life covers at an optimum costs. But term plans do not give anything back at the end of the term if you outlive it.

The article guides you through some of the common mistakes that people do while buying term insurances.

Buying too little

It is advisable always buy ten to twelve times your income in life insurance coverage. A small policy you are getting through work, which might be one year’s worth of coverage, isnot even near enough. If you are the primary source of income in your household, then your spouse and kids, parents need to be taken care of for a long time if something happens to you. Make sure you have sufficient and right coverage which will allow them to live comfortably and maintain their lifestyle until they figure out the next step in their lives.

Waiting too long

Life insurance is not a Pooja or a ritual for which you have to wait for perfect muhurat to buy. If you wait too long to buy life insurance, you leave your family vulnerable if something unexpected happens to you. Secondly, the  thumb rule is simple, the earlier you buy lesser is the premium and higher is the coverage. Term insurance premiums generally increase as you get older, so buying sooner rather than later can save you money.  Aging has lot of health issues which might increase your premium or at times not qualify to buy one. Secondly, many people think they should wait until they are debt free to buy life insurance, which is a wrong call as it makes your family more vulnerable.

Never buy short term plan

For saving few hundred of rupees you might choose shorter term coverage. Suppose you buy a ten-year policy and nothing happens to you and the policy expires. At that time your ten years older and buying a new policy or renewal becomes equally a tussle. Secondly just in case you have medical issues ten years from now it will raise the cost of your next plan or worse, you might not qualify for coverage at times. This will cost you even more in the long run. A general thumb rule is to buy plan based on when your kids will be heading off to college and living on their own.

Too many riders

Just be needy and not greedy for money. Some people fall for policy riders such as income replacement, premium waiver, critical illness and accidental death that increase their premium and pay extra commission to their agents, but offer very little value. You will buy because they have an emotional value attached to them, but they have very little actual benefit.

Failing to occasional reviews

Never keep a laid back attitude once you buy policy. The real task starts once you buy it.  It is always a smart idea to review your term insurance policy to make sure you have exactly what you need for your current situation. Your coverage might have been fine 10 years ago, but that doesnot mean it works for you now or in future. Make sure you have enough insurance to take care of your changing needs. Term insurance is exactly the reversal of golden goose story. It is your family who will receive the golden eggs in the end. The more you keep reviewing better are the returns your family gets if anything unfortunate event happens with you.