The Importance of Term Insurance in Financial Planning

One thing that the on-going pandemic has taught us is the importance of a good financial plan. A sound financial strategy secures yours and your family’s financial future. So, as a wise investor, you should look for opportunities that help you accomplish the same. A term insurance plan, for instance, will help you secure the financial future of your loved ones, especially after your death.

Although there is no savings component in a term plan, here’s how the policy helps in financial planning.

Term Insurance Acts As An Income Replacement

Let us understand how term insurance works as an income replacement option with a fine example.

Well, for starters, let us assume that you are an entrepreneur who is 30 years old. You have a wife who is 29 years old and mostly takes care of the family. You buy a term insurance plan with your wife listed as the beneficiary of the policy.

Now, we understand that your unfortunate demise can be emotionally wrecking for your wife. However, with a term insurance plan in place, you will be less concerned about how she might go on about her life financially in your absence. The payout received from the policy can act as an income replacement for your wife until she finds another source of income for herself.

Term Insurance Offers A Higher Life Cover

From your perspective, how much life cover do you think to be sufficient for your family to continue the current lifestyle? Well, when calculating the life coverage while purchasing insurance plans, you just have to follow a simple rule –

  • Individuals in their 40s should have a life cover that is 20-30 times their annual income
  • Individuals in their 50 should have a life cover that is 10-15 times their annual income
  • Those who are 60 years old above should consider a life cover that is at least fives times their annual income

Also, one should evaluate a few things when selecting term insurance coverage –

  • Your current financial status
  • Your current monthly expenses
  • Your lifestyle
  • Your financial liabilities and objectives

After evaluating these factors, you will be able to determine how much life cover is sufficient to secure your family’s financial future. Then, you can proceed to buy term insurance online from a reliable insurer.

The standard process of buying term insurance is as follows –

  1. Visit the insurer’s website and go to the ‘term insurance’ section.
  2. You can use the term insurance premium calculator to determine the amount charged on your desired coverage and rider benefits.
  3. If you think the price is affordable, proceed with the application process.
  4. Fill the application form with personal details.
  5. Make the premium payment online.
  6. The insurer will assess your application and issue the policy in no time.

To Conclude

As we know, term insurance is the most affordable life insurance product in India. In fact, there are several changes made to the policy over time to make it flexible for the audience. Insurers offer rider benefits to enhance the scope of the term plan. You can opt for these rider benefits at an additional price over and above your actual premiums. Overall, term insurance makes up for a sound financial investment that secures your family’s financial future.

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