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Financial Plan Ready for this year? Here’s Why Term Life Cover Should be the First Step

dateKnowledge Centre Team dateDecember 06, 2020 views156 Views
Financial Plan Ready for this year? Here’s Why Term Life Cover Should be the First Step

A financial plan is a must for every individual with or without responsibilities. The financial planning puts your short and long-term objectives in order and paves a way to fulfil them. However, there is another important part of the financial plan which aims to protect the financial interests of your goals and dependents.

This financial protection plan is also called a contingency plan and provides a roadmap for you in case of emergencies. Health, term life insurance and other insurance are part of this financial plan.

Executing Your Financial Plan

A plan without implementation is merely wishful thinking. The milestones you set for yourself and family define how your life should be. Few of these milestones are so important that they are even more important than your life.

Thus, achieving such important goals cannot be left to less than perfect execution of your plan. The steps of executing different transactions in your financial plan should be in the following manner:

1. Contingency Plan

  • Buy term life insurance cover
  • Secure health and Mediclaim insurance
  • Build an emergency fund

2. Start saving for retirement

3. Invest in your children’s future – higher education & marriage

4. Invest in wealth goal

5. Save to repay expensive loans

6. Invest in mid-term goals – home buying, renovation, vehicle, vacation, etc.

Why Contingency Plan First?

Imagine planning a long road trip with family or friends. You have decided the destination, date of journey, places to visit and return. Should you just take your car out, but everyone in with the baggage and starts driving?

Ideally, you would check if the car is ready for the kind of journey you wish to undertake. You’d check for tire pressure, kilometres to next service and even the paperwork before declaring the car fit for the long journey.

Life is not very different from a long road trip. You will face many different patches, some comfortable, some rough, there will be turns and twists and you will meet a lot of people. You will also make a lot of money during your journey and spend a lot of it too.

However, in life the journey is one-directional, after you, the next generation must continue driving forward. Contingency plan helps you achieve this certainty even in most difficult unforeseen situations.

Why Term Life Insurance First?

Although, as you read through this article, it may seem impossible. However, there is more than one reason for putting your limited resources towards a life cover first:

  • Your dependents stand to lose their only source of financial support in your absence
  • Money needed to sustain the family and help meet their goals is substantially large
  • Cost of hospitalization is lower and you can bear with savings and loans. So, if you must choose between life and health, life comes first.
  • The job loss would be temporary and you can still manage with your savings and recover later. However, loss of life is not recoverable.

Make Your Term Insurance More than Life Cover

Since term insurance is the first step after your financial plan, why not make it more than just a life cover? There are two ways you can turn your term insurance cover into an ultimate risk manager for your family:

  • Add more benefits to the base plan
  • Select features and plan benefits to make the plan work like a swiss knife of financial tool

Adding More Benefits to Your Base Plan

You can include more benefits with your term life insurance plan. These additional benefits will help you cover other natural risks like health, accident and disability. These risks may not always end up in the loss of life but are financially taxing nonetheless.

So, don’t forget to add the following benefits to your base term plan for a nominal increase in premium:

  • Accidental death and disability cover
  • Premium waiver benefit at least in the case of disability
  • Critical health insurance for life-threatening diseases like cancer, heart failure, etc.

Building a Flexible Term Plan

Apart from the additional covers, you can choose many features in the best online term plans which will turn it into a well-rounded financial solution. For example, consider the following problems with your current term plan setup:

  • After you, your spouse will be the primary caretaker of the family. But if she’s a homemaker she cannot secure a term cover
  • You may have a family floater Mediclaim insurance for your homemaker spouse. However, she’s also prone to unpredictable life-threatening diseases.
  • Your dependents may not have managed a large amount of money. Term insurance will suddenly add a crore rupees to their account. How comfortably can they use this money for their future needs and goals?

Here are few ways iSelect Star term plan from Canara HSBC OBC Life provides solutions for these problems:

  • Critical health cover is inbuilt with the term cover without any additional premium. So, the moment you buy term cover you automatically have a term cover as well.
  • You can add your homemaker spouse to your term cover and have a joint life cover. After your demise, the cover for your spouse continues without any extra charge. Thus, she’ll also have a life and critical health cover.
  • You can divide your term life cover benefit amount payable upon the claim, into two parts:

    Lump-sum payment: for taking care of immediate liabilities, and investing for future life goals

    Regular monthly income: for taking care of regular expenses and lifestyle. You can choose to increase this income every year to account for inflation.

With these benefits and features adding your term insurance first after completing your financial plan resolves multiple challenges. With these advantages, your term life cover is not just a life cover but an important part of your contingency plan.

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Frequently Asked Questions (FAQs) for Term Insurance

This being a term plan doesn't offer any payout after maturity or expiration date.

Each insurance company has its own term insurance premium calculator. If you want to check out the premium quote, go for the iSelect Star term plan calculator. It gives a premium amount based on your age, gender, habits, education, and annual income.

You can purchase an iSelect Star term plan anytime between 18 to 70 years of age.

It depends on your needs. For example, if you want to cover a child's education or wedding expenses, you have to include them in your coverage. Your premium will be calculated accordingly.

If your key purpose is to give your Family financial protection, go for the term insurance plan. And if you want some savings, in the end, go for a traditional life insurance plan.

Go for at least 12 times cover than your annual income. Or you can go as far as 20 times coverage as per your needs.

The right time is when you don't have anything to keep your Family safe from financial storms, and they rely on you for financial needs.

If you are unable to make the payment or suffering from a terminal illness, a term plan pays a part of the sum insured to treat your disease.

Term insurance riders are attachment or endorsements made, while taking the term insurance policy, as a supplementary coverage to policyholders. Apart from the core death benefit, term insurance riders offer below-given additional benefits:

  • Accidental Death Rider When a person suffers from a terminal illness, his/her family ends up spending a significant amount in treatment and medical expenses. Accelerated death rider pays a part of the sum insured in advance to cover such costs and save the family from running out of cash.
  • Accidental Disability Rider If the policyholder can't pay the premium because of an accident or permanent disability, a sudden disability this pays the premium on behalf of the policyholder till completion of policy term or for a defined duration.
  • Critical Illness Rider If the insured person gets a heart attack, cancer, or any other critical illness, this rider pays a lump sum on valid diagnosis.
  • Premium Waiver Rider If the policyholder is unable to make payments due to income loss or disability, a premium waiver rider waives off all future premium payments. And the term policy remains active until the expiration date.
  • Income Rider: The rider ensures that your family receives regular income + sum insured in case of unfortunate demise of life insured.

Anyone can go for life insurance as it offers some savings after the maturity date, but it doesn't cover the protection of your family . The best term insurance plan is solely designed for taking care of loved ones if something happens to you. Term plans act as a shield between your family and sudden financial fall. They make sure that your family lives a healthy life even after you. With a little amount paid per year, you can be worry-free from the family's financial conditions.

Questions that you need to ask while buying Term Insurance?

  1. 1. Amount of premium you have to pay based on your age, habits, education, and monthly income
  2. 2. The total number of benefits covered in the term plan. Do they include benefits that you care about the most?
  3. 3. How to save money on tax if you pay for the term plan?
  4. 4. Do they offer regular income options?
  5. 5. Can you change the coverage and premium in the future?
  6. 6. Does the claim consider valid if death occurs outside India?
  7. 7. Which kind of death is not covered by insurance?
  8. 8. Can NRIs take term insurance? If yes, what are the conditions?
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