I recall this particular instance from a few years ago, a close friend of mine faced a sudden health crisis. It was a wake-up call for all of us, reminding the uncertain nature of life. Having spent close to two decades in the insurance industry, I can say that while we can’t predict the future, we can certainly take steps to prepare for it. One of the most effective ways I have found to safeguard your family’s financial well-being is through term insurance. It’s a straightforward, purest form of life insurance that focuses solely on providing protection.
Let me venture further into how term life insurance acts as a safety net for loved ones in the event of unforeseen circumstances arising from a tragic demise. It ensures that even in your absence, your family can maintain their lifestyle, pay off debts and cover essential expenses without any financial trouble. It also covers the costs of indispensable responsibilities like home management and childcare — ensuring financial stability for the family without any added strain.
Key Reasons You Need Term Insurance Today
Despite understanding the importance of term insurance, we may sometimes put off purchasing this crucial financial cover. Let me give you a few key reasons to focus on this important financial decision at the earliest.
* Protection Against Loss of Income
Term insurance is crucial because it protects family members against loss of income if the policyholder passes away. For instance, consider a family of four where one parent is the sole earner, working to pay off the family home loan while supporting two children in school. In the case of this parent’s demise, term insurance can provide the funds needed to keep the children in school, pay off the loan and cover the living expenses.
* Affordability
Term insurance premiums are more affordable for younger applicants because of the low mortality risk. So, for affordable premium with substantial coverage, it is important to prioritise purchasing term insurance when you are in your 20s or 30s.
* Debt Coverage
Term insurance also provides a safety net to cover any outstanding loans that the policyholder may have taken.
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What is Right Life Cover While Buying Term Insurance?
The most significant part of buying a term insurance is choosing the adequate life cover. The right life cover when buying term insurance is typically determined by considering several key factors: your financial obligations, dependents’ needs, lifestyle, and future goals. The thumb rule for the right cover is to have a life cover that is 10 times your annual income. This ensures that in the event of your untimely demise, your family can maintain their current standard of living, cover outstanding debts such as mortgages or loans, and fund future expenses like education and healthcare. Additionally, accounting for inflation and any specific financial goals you have can help in selecting an appropriate and sufficient coverage amount.
The Bottom Line: Term Plan to Secure the Financial Future of Your Family
To understand how crucial financial security is for your family, try this exercise: think of five people who would provide financial support if something unfortunate happened to you. Whenever I’ve asked friends to do this, they can usually name only one or two people, or sometimes none at all. While we may have plenty of emotional and mental support, this highlights the critical need to carefully plan for your family’s financial well-being as well. Ensuring financial security requires thoughtful preparation and proactive measures to protect your family’s future.
Term insurance is a financial product that is a crucial addition to your financial portfolio. If you do not have a term plan yet, it may be a smart idea to double down on this goal and prioritise setting up a safety net for your loved ones. After all, the best time to have purchased your term plan was yesterday; the next best time is now.
(By Sameer Joshi, Chief Agency Officer, Bajaj Allianz Life)
Disclaimer: Views, recommendations, opinions expressed are personal and do not reflect the official position or policy of FinancialExpress.com. Readers are advised to consult qualified financial advisors before making any investment decision. Reproducing this content without permission is prohibited.
