Most of us hear about term plan often but aren’t much aware of what exactly it is. A term plan is basically a type of life insurance which offers coverage for a period of time to the policyholder. In case of demise of the insured over the tenure of the policy, a sum assured is paid out to his family. Term insurance not just offers peace of mind but also forms a crucial part of an individual’s financial plan. As one’s grows and moves through life, one could appreciate its several benefits.
Term plan as part of a financial plan
Financial planning refers to the process of meeting the financial goals with the help of appropriate management of your finances. This includes elements of wealth creation, protection, retirement planning, planning for specific milestones and most importantly planning for emergencies and contingencies. But where does term plan fit in?
The fact is, a term plan is very much a key to a robust financial plan. As you age, buy a home, get married, build your family, and plan for your retirement, the more crucial term plan becomes. Term plans are still a nascent idea and people don’t think of it until a major life event causes them to think what could happen to their family and loved ones in case of unexpected circumstances. While the key objective of buying a term plan is to safeguard oneself from unexpected circumstances, these plans help you and your family to live a secured life.
Most of us generally get confused on where to invest and how much to invest –bonds, stocks, real estate and so on. A term plan is also an equally important investment, which is affordable and most importantly tailors to needs at different stages of an individual’s lifecycle.
Why Term Plans?
Lower Premiums- Since there’s no investment element, the premiums are lower as compared to any other insurance policies. An individual as a thumb rule pays around only 1% of his annual income for getting a life cover.
Financial Security- An untimely death is disastrous and so are financial liabilities which are required to be borne by the family members of the deceased. For preventing such a situation, it’s advisable to invest in term plans which would take care of all the financial needs of the family.
Flexibility- It is one of the important advantages which a term plan offers. One could select an online or offline plan and can also customize and adjust the plan as and when required.
Tax Benefit: A term insurance also helps when you’re alive. You could get an income tax benefit up to INR 1.5 lakh under Section 80C for the amount of premium paid towards the term plan.
When should you buy a term plan?
Life coaches around the world believe that life decisions shouldn’t be taken too early or too late. However, it’s not the same when it comes to term plans. It’s advisable to invest in a term plan when you’re young. The early you start, the lower your premiums are.
The Bottom Line
It’s vital to invest in a term plan for all the working individuals and particularly when you’re the sole breadwinner for your family. The earlier you buy the more benefit you get out of it. Undoubtedly, you can’t afford to not have a term plan in your financial plan, for your family to secure financial independence and peaceful life.
