- As a thumb rule in financial planning, protection should precede savings and investments
- Term life insurance is the foundation stone for any financial planning
- Term life insurance’s inherent ability to provide a substantial protection cover at an affordable premium makes it an exceptional financial tool
- Term plans can also offer regular monthly pay-outs for a fixed number of years that help your family become financially independent in your absence
35-year-old Ranjit Panikar, a private employee and the sole breadwinner of his family, was investing ₹20,000 every month in several investment products until he met his friend and financial advisor Nitin Mehta.
"After hearing my grand financial plan of building a corpus of ₹3–4 crores 20 years down the line, Nitin asked me what if I succumb to the uncertainties of life much before my investments bring the desired returns? He also asked me who would take care of my family’s expenses in such a situation and what will happen to my children’s education and furthermore, their marriage expenses? His questions got me thinking," said Ranjit.
While Ranjit was lucky to have a learned friend, who taught him to ‘protect first and save later’, most of us tend to do just the opposite. Since most people are comfortable with the fact that a product like term life insurance doesn’t yield maturity benefits, most of us tend to skip it. However, term life insurance is the foundation stone for your financial planning. Read on to know how.
Term Life Insurance Offers Comprehensive Life Cover At An Affordable Premium
Risks are a part of life. While we all wish and pray for a smooth life, disaster can strike any moment. Term life insurance cushions your dependents from financial risks due to uncertainties of life. A term plan provides a substantial cover at an affordable premium, ensuring financial independence of your family even when you are not around.
For instance, a 30-year-old non-smoking male can buy Exide Life Elite Term Plan (online mode) with a sum assured of ₹1 crore for a little over ₹7,500 per annum for a 20-year term. This works out to ₹20 a day. It’s lower than the price of a cup of coffee! This is a small price for the peace of mind it brings.
Family Income Benefit Through Monthly Pay-Out
You work hard to ensure that you provide a better standard of living to your family. However, have you ever thought what will happen if you are not around? Will your family be able to maintain the same standard of living even in your absence? In such a scenario, a substantial life insurance cover ensures that your family maintain the same standard of living that they currently enjoy. A Term Life Insurance plan is an ideal instrument to achieve this objective.
Term life insurance plans offer various options to receive the pay-outs such as lump sum pay-out or monthly pay-outs for a fixed number of years, say 5 or 10 years till your dependents become financially independent. The monthly pay-outs help your family manage their day-to-day expenses.
Here's a look at the pay-out options offered by Exide Life Elite Term Insurance Plan:
||How is the Payout made?
||Sum Assured ₹ 2 Crore
|Option A: Lump Sum Payout
||100% Sum Assured is paid in a single payout
||₹ 2 Crore is paid as lump sum
|Option B: Lump sum Plus Family Income Benefits(FIB)
||50% of sum assured is paid as lump sum and 0.95% of Sum Assured is paid every month for 60 months (5 years)
||₹ 1 Crore as Lump sum + ₹ 1.9 lakhs every month for 60 months (5 years)
|Option C: Family income Benefit(FIB)
||1.07% of sum assured is paid every month for 120 months (10 years)
||₹ 2.14 lakhs every month for 120 months (10 years)
● Customizable With Riders to Suit Specific Needs
Riders are a smart way to customize a term life insurance policy to suit your specific needs. The common riders available are:
- Critical Illness Rider
- Term Rider
- Accidental Death/Permanent Disability Benefit Rider
With the help of these riders, you can cover specific additional risks that might not be offered under standard life insurance policy. These bring additional peace of mind, and increased sum assured to help your family through tough times.
Peace of Mind - The Biggest Return from Term Life Insurance
Peace of mind is the biggest return from term life insurance. Unfortunately, some of us fail to see this. Returns do not necessarily have to be in monetary terms. You get a peace of mind knowing that your family and dependents have the financial cushion to fall back on in your absence.
Most investment tools require long-term discipline and commitment, and warrant that you continue investing regularly. This could become difficult when you need to shoulder more responsibilities later in your life. However, term life insurance gives financial protection to the family of the deceased by means of the sum assured.