Believe it or not, but life is always full of uncertainties, and unless you are creating a financial backup, i.e., a safety net for yourself and your family to fall back on, it can get unpredictable and difficult to survive at any point in time. Therefore, every individual, especially those who are earning solely to provide for their family, will want to plan and take necessary precautions to safeguard their family from emergencies, death of the breadwinner in the family and future debt or liabilities.
In tumultuous times like the current ones, which is a clear example of the unpredictable threat to you and your family, a term insurance policy acts as the much-needed safety net that can benefit you and secure your family in such times. Therefore, it is important to understand the benefits of an insurance policy like life insurance, where you not only start saving towards the future but also keep a lump sum ready for your family to access in your absence.
However, before you make the decision of buying a term insurance plan, it is crucial to assess personal finances and have your detailed profile in front of you. Here are some of the most common questions for which people seek answers:
- Do I Have Any Kind Of Financial Liabilities?
Before making any type of investments, be it in an insurance policy, stock market or even mutual funds, it is imperative to assess your financial situation. For example, if you have pending dues like loan EMIs or credit card bills, then it would be wise to make prior provisions for these expenses before you move towards investing.
There are also long-term liabilities like a home loan for 15-20 years, for example, which is not something you can just brush aside. An ideal way would be to plan for your loan EMIs ahead of time and start automatic EMIs from your account every month.
After sorting out your short-term liabilities and listing down the ones that are long-term (marriage, children’s further studies, children’s marriage etc.), it will be easier to judge the cover your family will need from a term insurance policy to be financially independent.
- What Are My Family’s Future Goals Like?
A term plan essentially offers the much-needed financial cover for your loved ones, and you can take care of your family even when you are not there anymore. To be able to gauge the financial cover for your term policy, you need to know what kind of goals you and your family would like to achieve in the short or long run. Goals can be anything from saving for marriage, international trip, family planning, children’s further studies or even a simple retirement plan for your parents.
Now, a few of the most searched keywords online are ‘what is term insurance’ and ‘how to secure my family financial’, and the answer to these questions is a term insurance plan that is customised to suit your and your family’s needs.
Image Courtesy: Shutterstock
- Do I Need To Have A Contingency Plan?
The current pandemic has shaken people all over the globe, and it is the uncertainty of this kind that gives you a reality check occasionally. Not only do people understand the merits of living healthily, exercising and eating well, but they are also making smarter financial decisions and fast!
Once you have witnessed how fickle life can be and how easily unpredictable events can cause financial or even permanent trauma to a family, a contingency plan will be all you can think of then.
- Can I Afford A Term Insurance Policy?
You do not have to worry about the expense when it comes to buying a term insurance plan as they are one of the most cost-effective and affordable life insurance plans. Besides, the premiums you pay towards a term insurance policy are eligible for tax deductions according to section 80C of the Income Tax Act (1961). As long as your annual premium amount does not exceed 10% of the total sum assured, you can claim this deduction every year, up to Rs. 1,50,000.
Another incentive is the death benefit that your beneficiaries receive, which is generally tax-free. The life insurance proceeds aren’t included in the gross income, and hence there is no need to report them during tax filing either.
Term Insurance: A Necessity For You And Your Family
All in all, a term insurance policy will not only be affordable with its premium but also suffice for your family’s needs in your absence. The key to creating a sound financial plan is to start early, as an early start equals better benefits in the long run for you and your family.
Remember, the best term insurance policy coupled with a few diversified investments will help you create a strong portfolio from the very beginning, and you will no longer have to worry about providing for your family even when you are not around.
