5 Scenarios that prove term insurance to be inevitable for future
Life is always an unpredictable game with a lot of twists and turns happening at unexpected times. While you may get emotional support from your dear ones to cope with such situations, financial support is available only if you have planned for the bad days earlier. Life insurance, especially term insurance, helps you achieve that financial freedom by creating a solid foundation for your family to continue their life even if you are not around them.
Though there are many term insurance plans in the market offered by different insurance companies, it all boils down to is your purpose of buying one. Since the needs of every person differ, the use of a term policy also varies with each individual. So we have compiled a list of scenarios that prove how a term insurance plan is necessary while planning your future.
5 Reasons why a term insurance plan is a must for every individual while planning for future
- Provide complete financial protection after your lifetime
- Create an alternate source of monthly income
- Covers against rising healthcare costs
- Coverage for accidental death/ disability
- Ensures spouse and children’s safe future
1. Provide complete financial protection after your lifetime
What happens to your family members after your demise is a scary thought for many, especially if you have many dependents relying on your finances. When you buy term insurance, the insurer promises to pay the sum assured to the nominee/ beneficiary if you encounter death during the policy term. By choosing a high coverage amount, you can ensure that your family’s financial requirements will be taken care of without any trouble. Let us look at an example,
Geetha Kumari, a 28-year-old architect, was thinking of buying term insurance online since the premiums were low for a high cover term plan. She did a lot of research comparing the various insurance policies before finally concluding that a term plan is her best choice. Taking the advice of her auditor, she purchased a 1 crore term plan for a tenure of 30 years at an affordable cost. Geetha decided to invest in a term plan to ensure her kids and parents do not have to go through any financial difficulty if she passes away due to any unfortunate incident. The sum assured will be paid as the death benefit, which she believes will help her family steady themselves and lead a dignified life in the future.
2. Create an alternate source of monthly income
Working during your prime years guarantees a monthly salary that will eventually cover all the daily expenses. However, if there is a break in your job due to retirement or death, or illness, your family wouldn’t have a regular source of income, pushing them into financial stress. In addition, individuals who are into business and other informal sectors may not always have a backup plan for alternate income during their later years.
A term policy can help in this scenario by providing an alternate monthly income source while still providing life cover for the policyholder. For example, there are term plans that pay monthly income after the age of 60 years, along with a lump sum amount at the time of maturity. So the insured person can still be able to make ends meet with this monthly income and still enjoy the coverage, which also pays the death benefit if he/she passes away during the policy term.
3. Covers against rising healthcare costs
The recent COVID-19 pandemic has brought back the focus to health and the need to take care of ourselves. The changes in lifestyle and diet patterns have also contributed to the rise of critical illnesses among a large group of the population, which is expected to further increase in the future. A term plan with critical illness or terminal illness cover is a very good tool to safeguard yourself from spiraling treatment costs in case you are diagnosed with any such critical illnesses.
Rohit, a 35-year-old businessman, buys a term insurance policy for Rs 1 crore along with a separate critical illness cover for Rs 20 lakhs. He is diagnosed with kidney failure in the 5th year of his policy term and has to pay Rs 15 lakhs towards treatment. Rohit immediately agrees to the operation since his term plan’s critical illness cover will help him cover the hospitalization and treatment costs. After utilizing the critical illness cover of Rs 20 lakhs, the coverage of his base policy shall continue till the end of the policy term.
4. Coverage for accidental death/ disability
Travelling is becoming easier and faster nowadays compared to previous years, which has also increased accidents. A term plan with an accidental death/ disability rider will ensure you are adequately compensated if you are involved in a bad accident leading to death or disability. In case of disability, the policyholder is paid the accidental benefit apart from waiving off any future premiums of the term plan that will continue to provide coverage till the end of its tenure. Therefore, riders are valuable add-ons that can be attached to a term plan to extend its functionality to meet certain specific situations of life.
5. Ensures spouse and children’s safe future
Family is the place that everyone goes to during challenging life situations. This is the same for your spouse and children as well. But when you are no more around them, a term insurance policy helps create a stable environment. There are goal-based term plans that increase the sum assured of your policy by a certain percentage during every vital stage of life, such as marriage, the birth of 1st child, education, etc. This automatic facility ensures your family is covered at all times with the right coverage amount keeping in mind the rising expenses, increasing inflation cost, and living costs.
Buying a term insurance policy is a one-time and lifetime investment that has multiple uses for yourself and your family when looked at from a future perspective. Keeping in mind the benefits provided by term insurance in the long run, the premium that one has to pay is minuscule. Just because it has many advantages, financial experts suggest everyone buy term life insurance at an early stage as it protects every walk of life.
The future depends on what we do in the present – Mahatma Gandhi
