It was that time of the month again when Rahul and Jiya had to pay off the monthly bills. At evening, over a cup a coffee, Jiya and Rahul sat down to figure out their expenses. Contemplatively looking at the list of expenses, Jiya anxiously asked, “There’s not much is left, isn’t it?”
“I know, but I have been thinking. We really need to buy a life insurance plan” Rahul said
“What! Are you serious?” she said in a vexing tone. “Don’t we have enough expenses already? We will think about life insurance later”
Trying to make a point, Rahul said, “For a moment, just think if something were to happen to me, how would you manage? I know we could think about this later but isn’t it better to be safe than sorry. I think I should buy a term insurance plan. It’s neither complicated nor expensive. We can get high life coverage at affordable premium rates. It will act as a shield that will protect you against financial challenges in case an unfortunate event of death occurs to me. Today, at work, I calculated the premium amount for me who is a 28-year-old non-smoker male looking for a life cover of 1 crore, the premium is as low as Rs. 500-600 per month! Additionally, we can also avail tax benefits under Section 80C, 80D, 80DD, 10(10D).”
She agreed and gave her verdict, “True enough, term insurance plans are simple and we could afford to buy one!”
Rahul contemplated the next steps, acknowledging the fact that the process of buying insurance would be easier if they planned it right. Based on this, Rahul discussed the process of buying insurance with a friend and found out that he needs to consider 4 important things when buying a term insurance plan.
Here are 4 considerations when buying a term plan. Make sure you leave nothing to chance!
- Establish the cover amount
To decide on the amount of cover you need, you must assess and consider aspects such as:
- Your age,
- Your financial responsibilities,
- Your family’s future financial requirements,
- Your basic expenses based on your lifestyle habits,
- The loans you are servicing today, and
- Whether you are accounting for inflation and rising costs.
- Determine the policy period
- a) Based on your age – Primarily, you can determine your policy period based on your age. Like my friend advised, “The younger you are a longer policy period would be advisable.”
- b) Based on when you plan to retire If you have a retirement plan, then you can opt for a policy period till you reach the age of retirement, which is usually until 60 years for most people. This will ensure that the cover extends throughout your working years and your family is financially stable in case of an unfortunate event of the earning member.
However, if you have not done any retirement planning, you should take the policy for the maximum period. I thought aloud, “How would I pay premiums after I retire?” My friend assured, “Don’t worry. There are insurance companies that offer a unique proposition. You can pay your premiums only until the age of retirement, that’s until the time you are earning a salary. But the cover extends beyond 60 years of age! Interesting, isn’t it?
- c) Based on your other financial responsibilities Depending on your other financial commitments and when they are due, you can decide what policy period is suitable. For example, if you have taken a house loan for 30 years, it makes sense to have a term life cover for at least 30 years so that the family is protected from any financial burden in case of an unfortunate event.
- Find suitable payout options
The premium amount of your policy will depend on the payout option you choose. You can choose between getting a lump sum payout or a lump sum payout option with regular monthly income.
- Select the right insurer
With many insurance companies offering different types of plans in the market, it is very important to choose the insurance partner that best suits you.
- Pay premiums on time
You should pay the premium in a timely manner to avoid a lapse. Always disclose the details of life insurance to your family members so that they do not find it difficult to get the cover amount when they need it most. Always review your life cover size at regular intervals, because your requirements may change in the future depending on changes in your income profile and lifestyle.
Rahul and Jiya were thankful to their friend for the information. It definitely made it easier for Rahul to decide what type of insurance plan was best suited to his requirements.
After signing on the dotted line Rahul could see the satisfaction on Jiya’s face. Giving more than an appreciative hug, she quipped, “Well! I’m glad I married you! You’ve got me covered on all counts!”