In a fast-developing economy like India, term life insurance can provide critical financial security. In the wake of the bread winner’s unfortunate and untimely demise, their dependents can have a secure life when their financial requirements are taken care of. Term insurance offers high life cover at relatively low premiums, making it an ideal instrument for securing the financial future of your loved ones in your absence. A 30-year-old healthy male without any pre-existing conditions and who is a non-smoker, for instance, can be eligible to secure a ₹1 crore cover for a 30-year term by paying a monthly premium of close to ₹1,000. In the unfortunate event of the policyholder’s demise, the proceeds of the policy can help the family meet immediate expenses, pay off debts, fund children’s education, or maintain their standard of living.
Choosing the right term insurance cover involves evaluating current expenses, liabilities, and future obligations. A common rule of thumb is to opt for a cover that is 10–15 times your annual income. But an ideal approach would be to consider following: Outstanding and potential liabilities: Home loans, education loans, personal debt. Dependents’ needs: Education, marriage, healthcare, and lifestyle expenses. Inflation: Factor in rising costs over the policy term. Even if you don’t have a family today, whenever you plan to start a family, medical and educational expenses will rise and your loved ones will need adequate financial protection. The tenure should ideally cover your working years—till around age 60–65. People often complain that term plans don’t reward policyholders if they survive the policy term. However, it is essential to understand that term plans cover the risk of unfortunate events, and expecting returns on the policy defeats the primary purpose of protection. Nevertheless, if you opt for a Return of Premium (ROP) term plan, you are eligible, subject to conditions, to receive the premium back on survival of the term.
A member of Insurance Awareness Committee (IAC-Life) of the insurance council said, “With increasing responsibilities, term insurance is a necessity that can secure the financial well-being of dependents and allow you to forge ahead, unhindered. With the family’s future secure, you have the peace of mind to focus on fulfilling your potential and aspirations.”