Your family would be very special to you. They make your life joyful and meaningful. It is only natural that you reciprocate all that they mean to you. You would of course do it in your way by giving them the best possible life in your given circumstance - be it education, health care, entertainment, travel or a whole host of other ingredients of a happy life. When today’s needs are met, there is the tomorrow to be dealt with. You would want to ensure that your family can sustain the present lifestyle in the future too. Building a solid financial foundation is of utmost importance to make sure your dear ones live a similar life in the future.
What can go wrong?
Apart from the known needs of your family, there is also the unknown that you have to plan for. Yes, life has its own twists and turns which have to be negotiated deftly. Predicting these twists is not humanly possible. But that does not mean that we can leave everything to fate. Probably the biggest twist to life can be untimely death, especially of the main breadwinner of the family. It comes as an emotional shock to the family who suddenly feel rudderless. And then there is the financial shock to be dealt with too. The regular income that the bread winner was bringing home every month would suddenly stop. This is where life insurance helps the family. It can provide the much needed financial support to the family. Term Insurance Plans can provide the cushion till the family can stand on its own feet.
Though there are many types of insurance plans, term insurance plans are the simplest and most affordable. These plans offer only life cover and there is no investment component in this plan. It pays only in the case of an unfortunate event like death of the insured person. The premium is quite affordable and a large sum assured can be bought without much burden on your finances. There are no complexities like investment fund, maturity value, investment returns, etc.
How to choose a term plan
The first thing you need to decide is how much life insurance you require. This would depend on your family and your financial circumstances. So expenditure pattern of the family and their future needs have to be factored in. Unpaid loans, if any, need to be considered too. Calculators available online can help you in this regard. Alternately, you can use common thumb rules to decide on your insurance requirement. You may go in for an insurance cover of say 10 times your annual income. The same may even go up to 20 times your annual income if you reside in a metropolitan or other city where the cost of living is higher. Ideally, the insurance proceeds and the returns from it should fund the family’s expenses till they become financially independent. You may also seek professional guidance from your life insurance advisor.
Because of the simplicity of these plan selecting the right term plan becomes rather easy. You only need to look at the life insurance company, its service and the premium amount. The life insurance company should be a reputed one with a good track record of settling claims. Customer service is another important aspect as insurance is usually a long term relationship.
How can you get smarter in buying term plans?
Going online to buy a term plan is one of the smart options today.. There is the other option of going for the smarter varieties of term plans which would ensure that you do not lose the premium that you pay for the policy. Isn’t getting your entire premium back smarter than saving just a portion of it by going online? Yes, there are plans which would ensure that you do not lose the premium that you have paid. And they are offered as three key variants:
If the insured person survives the policy term, the life insurance company would refund the premium paid. So, you get back the premium once the policy term is over. You enjoy the life cover during the term of the policy.
There are plans that give you back even more than the premium that you paid while you enjoy the life cover. The returned amount would be a specified percentage more than the premium paid. For instance, if Mr.A has bought a term plan where he has paid a total premium of Rs.1 lakh over his policy term, he would be paid back the entire premium amount of Rs.1 lakh plus an additional amount, which will depend on the terms of his policy.
This offers you an additional cover over your base sum assured under the plain vanilla return of premium option (variant 1). For example, Mr.A, aged 35 wants a total life cover of Rs.50 lakh for 20 years. He may opt to buy a Rs.25 lakh cover of variant 1 and an additional cover of Rs.25 lakh under the normal term plan which does not refund any premium. Suppose he pays a premium of Rs.10,000 per annum and Rs.2,000 per annum for the two options respectively, he will get back Rs.2 lakh (20x10000) at the end of the cover term. The balance of Rs.40, 000 (20x2000) will not be returned.
These variants give you the flexibility to tailor your insurance requirement not only at a lower cost but also offer you options to adjust premium payments as per your financial circumstances and profile. Based on your cash flow situation and return expectations, you may decide on the best variant that suits your requirement and profile.
Term insurance, which offers a simple and affordable solution to cover your life, has gotten smarter and better. Innovative products ensure that you do not have to endure the pain of losing your premium under term plans. Buy ‘smart’ security for your family.