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Why New Parents should Buy a Term Life Insurance?

dateKnowledge Centre Team dateApril 19, 2021 views121 Views
Why New Parents should Buy a Term Life Insurance?

Having a baby can bring gaps in your financial system to be addressed directly. New parents often feel they need ways to provide financial security for their growing families, including buying the best online term plans. With so many competitions and attention being paid to you and your finances, buying a term insurance can fall off the list.

When you are ready to put this puzzle piece in place for your financial plan, here are the top things you should know as you get started.

Why New Parents Need to Buy a Life Insurance?

While buying life insurance may feel frustrating, it really is not. Or, at least, it doesn't have to be hard. The process has seen excellent improvements and adjustments in recent years.

  • Child Care is Expensive

    The cost of raising one child up to the age of 18 in a low-income family is Rs.1,69,86,355.44. This figure takes into account basics such as housing, food, education and daycare, and the cost of raising children tends to increase over the years. Remember, this number can vary greatly depending on where you live and how much your lifestyle costs or not.

    This is where covering life insurance is most important. It can help ensure that your partner can take care of the children financially when you are gone. In exchange for your monthly term life insurance premiums, the life insurance company pays the death benefit (the amount of life insurance you have bought) your beneficiaries or beneficiaries can use to help cover their costs.

  • Future Education or Higher Studies

    We have already mentioned how expensive it can be to raise a child up to the age of 18. However, the daily expense of food and shelter does not end when your child leaves high school. If you plan to pay for your child's higher education, you should cover the cost of college when you buy life insurance.

  • Don’t have Adequate Coverage

    Employee life insurance, also known as group health insurance, is a great employee benefit. However, it can leave parents feeling insecure and unable to access information when changing jobs.

    Most policies provided by an employer only provide 1 or 2 temporary coverage on your annual salary. You can usually buy a lot of coverage if you want, but "at a group rate." This means that you usually do not benefit from the prices you can get as a young, healthy parent as you would benefit from an individual life insurance policy.

  • Life Insurance is Affordable

    With the living costs going up year after year, you may think you cannot afford to buy a life insurance. Think again. Among any other expenses, life insurance policies are less expensive than most people realize. And if you shop while you are young and healthy, you can lock in at a lower rate. That means, if you buy a life insurance plan at an early age, you will have to pay lower premiums. The premiums go up as your age increases due to the associated health risks.

How much Life Insurance Coverage you should Opt for?

Life insurance is a personal financial product. Therefore, every family needs a different and clear amount to cover their expenses and needs. Factors such as your health, income, debt, outgoings and living expenses affect how much insurance is right for you.

As a parent, you have to calculate the entire cost that your family may need if you happen to pass away. Take inflation into consideration while figuring out the life insurance cover amount as your life goals will also evolve with changing stages of life.

Read more on how much life insurance cover do you need.

How to Choose a Nominee for your Life Insurance when you become a Parent?

When naming your life insurance beneficiaries, most parents often refer to each other as the main beneficiaries. However, it is also important for parents to have a mutually beneficial argument in case something happens to both of them. A dependent beneficiary is a beneficiary who receives a benefit only if the principal beneficiary dies or is not available.

We do not encourage the naming of a minor as an heir. Although children can be called beneficiaries, they cannot collect death benefits if they are under "age". If the minor is called a beneficiary, the court will appoint a custodian, which can be time-consuming and prevent your child and guardians from receiving funds after your death.

Read all about how to choose a nominee for a life insurance plan.

Best Life Insurance Plans for New Parents to Consider

Becoming a parent brings in all the more reason in your life to be financially secured. You have a responsibility that needs you to be on your toes all the time. Finding and choosing the right life insurance plan is just the beginning or you can say – is the first step that you can take to protect your child’s future.

There are various life insurance plans that you may buy, here are a few life insurance plans by Canara HSBC Oriental Bank of Commerce Life Insurance for your consideration:

1. Invest 4G

This is a Unit Linked Insurance Plan that acts as a savings cum protection plan. It allows you to build a legacy for your children so that they can fulfill their dreams even if you are not around. The plan can be customised as per your goals and changing requirements.

Learn more about Invest 4G.

2. Guaranteed Income4Life

It is a highly customisable protection cum savings plan that offers guaranteed benefits such as regular income, sum assured at maturity, and yearly and loyalty additions. Whether you need a long-term protection cover for your children and spouse or you want a build a corpus for your child’s future education – Guaranteed Income4Life can help you sail through all these needs without much hassle.

Learn more about Guaranteed Income4Life.

3. Guaranteed Savings Plan

The moment you become a parent, you realise that there are a few things in life that cannot be left to chance. For example, your child’s education fund, their marriage, or providing a financial protection to your loved ones. Guaranteed Savings Plan allows you to save money regularly for meeting the milestones of life. It offers guaranteed benefits along with the flexibility to choose your savings horizon as per your risk appetite.

Learn more about Guaranteed Savings Plan.

Up your investments and redraft your financial planning the moment your baby steps into the world. Chart out everything that your child may aspire for one day and figure out the expenses that will accompany. Inflation can derail your financial planning, however, if you consider inflation while calculating the amount that you may need in the future – you will be safe. Prioritise your financial goals and improve your saving horizon over the years to enjoy maximum benefits.

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Frequently Asked Questions (FAQs) for Term Insurance

A person can only purchase a term insurance plan till the age of 65 years, and they can choose the risk coverage for up to 99 years of age. One can easily buy the best online term plan between the age of 18 to 65 years.

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 a 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?
  9. 9. Does the term insurance plan have a cash value if you decide to cancel the policy?
  10. 10. Under what circumstances can a term insurance plan be cancelled?
  11. 11. Can I pay the premiums online or make electronic payments?
  12. 12. What will happen to the term plan if the life assured starts smoking after purchasing the policy?
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