Sunday, June 27, 2021

Should you opt for Term plan while Financial Planning?

Financial planning refers to the process of meeting 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 the term plan fit in?

A term plan is basically a type of life insurance that offers coverage for a period of time to the policyholder. In case of the demise of the insured over the tenure of the policy, a sum assured is paid out to his family. Term insurance does not just offer peace of mind but also forms a crucial part of an individual’s financial plan.

The fact is, a term plan is very much a key to a secured 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 under looked and people don’t think of it until a major life event causes them to think about 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 secure life.

Most of us generally get confused on where to invest – bonds, stocks, real estate etc and how much to invest. A term plan is also an equally important investment, which is affordable and most importantly secures your family.

Why should you buy a Term plan?

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 every year for getting a life cover.(I would prefer that to go around 3% rather than 1 %)

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 few term plan offers. One could select an online or offline plan and can also customize and adjust the plan as and when required.(Not in many cases though- You need to decide about accidental benefit as well as terminal illness before opting for a term plan)

Tax Benefit- 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.
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.

Written by - Suketh Shetty

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