Why you should get term insurance right now

We all love our families and want the best for them. We try to fulfil their wishes to the best of our abilities. One easy and simple way to show your love for your family and to make sure that they continue to live a dignified life even in your absence is to take a term insurance.

Life is unpredictable, and there will be times when things don’t go according to the plan. Term insurance is one of the simplest financial product which can safeguard your family in times of an unfortunate event.

Getting insurance is the first and most crucial aspect of financial planning. In term insurance, the beneficiary receives the sum insured after the death of the insured person. However, one needs to remember that the term plan does not pay back any amount if the insured person survives the tenure of the policy. You can avail higher life cover by paying a lesser premium.

Who should take term insurance?

If you have dependents whether it is your spouse, young children or elderly parents, taking insurance is necessary. However, even if you have no dependents, but have outstanding loans like home loan or vehicle loans, taking term insurance is also essential in this scenario.  

It is beneficial to take term insurance at the earliest because the premium paid and the age of the insurer is directly proportional. This means that longer you wait to get term insurance, the higher will be your premium. The premium is likely to increase as the number of responsibilities and health issues may crop up. Also, unlike health insurance, where the premium covered keeps on growing, the premium for term insurance remains the same throughout the tenure.

What should be the ideal insurance cover?

Figuring out the ideal insurance cover is one of the most important things to consider when taking a term insurance cover.

A cover of Rs.50 lakh may be sufficient if you don’t have dependents. But it will not be enough after you have a family. You will have to increase your cover after every significant event like marriage, the birth of the first child and second child etc.

As a thumb rule, life cover should be equivalent to 10 times of your annual income. However, that is just the tip of the iceberg. Loans and debts, future expenses, savings and investments, are some of the other factors that should be kept in mind while calculating the insurance cover. The outstanding dues on your home loans and vehicle loans should be considered in the term insurance. However, you don’t have to calculate your credit card debt in this scenario.

The other important part is providing for future expenses such as children’s education, marriage and day to day expenses. Consider a reasonable inflation rate while calculating future costs. You may also be investing in these goals through systematic plans in mutual funds, but it is essential to consider these goals as accumulating for these goals may come to an abrupt to end in your absence. Having adequate term insurance will make sure that your children don’t have to compromise with their education.  You can use a ‘Human Life Value’ calculator available on the websites of insurance companies to find out the ideal life cover for you. Don’t make the mistake of rounding of the amount to the nearest round figure.  It is better to take higher insurance cover than to take less insurance cover.

You can take the help of financial advisor to calculate and find out the right amount necessary for you.

Another essential aspect of term insurance is tenure. Many people make the mistake of taking the term insurance to 75 or more. Typically, you should consider term insurance till your retirement age of 60 as the family’s dependency after your retirement will come down drastically.  

Term insurance is one of the vital steps in financial planning. Take one now and relax.