When in Need, Term Plans, Even Though High Risk, Can Help Out During Uncertainties
Most insurance policies in India are bought on the pretext of saving taxes right before the end of the financial year in March, says an article published in Business Standard in January 2014. In such cases, you might feel satisfied that you have saved tax; however, the sole purpose of buying an insurance policy might be compromised. Insurance policies are meant to offer life cover. You can either buy term insurance, which is a pure vanilla product, or other policies that are part investment products.
Benefits of Term Plans
A term plan offers one of the highest cover at the lowest cost. The premium towards this policy is merely a fraction of what you would pay for other policies. Also, in case of other policies, the benefits are dependent on the return on investment. However, you might argue that it offers only death but no survival benefits, unlike other policies. But a term plan gives you the satisfaction that your family would not have to face a cash crunch after your demise. It gives you the opportunity to buy sufficient cover without compromising on your current financial needs. The entire premium amount goes towards covering the risk.
The benefits of this policy don’t just stop here. It is an insurance policy that can help you plan efficiently for your family’s financial security after your death. The sum assured will not only take care of your family’s daily expenses and help them maintain their standard of living, it will also take care of your child’s education and marriage expenses. Now, think what would happen in the absence of sufficient cover. Your loved ones might end up compromising on necessary expenses. Moreover, the sum assured can also help your family pay back your debts and loans.
How to Make the Right Choice
To make sure that your term insurance policy fulfils the purpose you bought it for, you must choose the cover amount and tenure carefully. While choosing the sum assured, you must take into account your family’s standard of living and daily expenses, money needed for your child’s education and marriage, and any debts or loans you are repaying. Also, factor in the inflation rate. Ideally, you should buy a policy 10 to 12 times your current annual income.
As far as the tenure is concerned, choose a tenure that covers you up till retirement or till you expect your children to become independent. You must also choose the minimum tenure during which you expect to repay your loans.You can also choose the mode of payment of the sum assured. It can either be paid as a lump-sum amount or as monthly payouts. It can also be a combination of the two. You should also consider buying term insurance online. Online policies tend to 40 to 50 percent cheaper than their offline counterparts.