POST 6: Financial Literacy: Why Term Insurance Should Be Mandatory for Everyone

In today’s busy life, we are always on the move, whether rushing to work, school, or managing household responsibilities. While we strive to stay safe and cautious, life is unpredictable. Accidents or unforeseen events can happen at any time, and their impact affects our family.

Recently, we came across a viral post where a car driver followed Google Maps directions, and the car fell into a gorge, resulting in the tragic death of all three passengers. After this incident, social media is blaming Google, raising serious concerns.

Now think about what would happen to their families if they didn’t have term insurance. It’s heartbreaking to imagine. Many times, while returning home from the office, I’ve witnessed accidents where co-passengers have lost their lives on the spot due to bike crashes or slipping.

Such incidents remind us of how uncertain life is and how important it is to ensure our family's financial security in case of unforeseen events.

If you are the sole earner of your family, how would they manage if something were to happen to you? Sure, they might eventually find a way to move forward, but wouldn’t it be better if you could plan ahead to secure their future?

This is where term insurance comes into play.

What is Term Insurance, and Why Does It Matter?

Term insurance is one of the simplest and most effective tools to ensure your family’s financial security. It’s a life insurance policy where you pay a small premium for a specific term (10, 20, or 30 years). If something happens to you during this period, your family receives a lump sum amount, providing them with financial stability during tough times.

In India, LIC is a household name, offering policies with sums assured of ?10–20 lakhs. While these plans are good, private insurance companies today provide term insurance with coverage ranging from ?10 lakhs to even ?2 crores, often at highly affordable premiums.

For instance, if you start a term insurance policy in your 20s, the premiums are significantly lower. As your age increases, so does the premium amount, making it essential to act early.

Why Term Insurance is a Must for Every Indian Family

1. Affordable Premiums: You can secure a high sum assured for as low as ?460 per month. The younger you are when you buy, the cheaper the premium.
2. Financial Security for Loved Ones: In case of your untimely demise, your family receives a lump sum payout, which can be used for household expenses, education, or debt repayment.
3. Critical Illness Coverage: Many term insurance plans offer optional critical illness coverage. This means if you are diagnosed with a major illness like cancer or a heart condition, you receive a lump sum amount to manage medical expenses.
4. Accidental Death Benefits: Some policies provide additional payouts in case of accidental death, giving your family extra financial support.
5. Tax Benefits: Under Section 80C and 80D of the Income Tax Act, you can claim tax deductions on the premiums paid. The death benefit received by your family is also tax-free under Section 10(10D).
6. Flexibility in Payout Options: Insurers now offer multiple payout options—lump sum, monthly income, or a combination of both—so your family can manage their finances effectively.

Why Start Early?

Starting early not only lowers your premium but ensures long-term financial security for your family. Imagine being in your 20s and locking in a ?1 crore policy for just ?700–?800 a month. By the time you reach your 40s or 50s, you’ll be paying much higher for the same coverage.

Visit: https://termlife.policybazaar.com/

How to Choose the Right Plan?

With so many options available in the market, here’s how you can pick the best term insurance plan for you:

• Compare Premiums and Coverage: Check policies from LIC and private companies like HDFC Life, ICICI Prudential, Tata AIA, and Max Life.
• Look for Riders: Add-ons like critical illness cover or accidental death benefits can provide extra security.
• Understand the Claim Settlement Ratio: Choose a company with a high claim settlement ratio to ensure your family doesn’t face hurdles.
• Go for Long-Term Coverage: Many plans offer coverage until 99 years of age, ensuring lifelong security.

Remember

LIC is undoubtedly one of the most trusted names among Indians, offering life insurance policies with coverage of around ?10–20 lakh in case of death. While it’s a great option to have some coverage, it’s worth exploring alternatives beyond LIC. Many private insurance companies provide term insurance plans with coverage ranging from ?10 lakh to ?2 crore or more in 700 to 1300+ per month premiums. These plans offer significantly higher financial security for your family.

However, it’s important to note that the premiums for term insurance policies are not refundable unless you opt for a refundable premium plan. That said, if you purchase a term insurance policy at an early age, such as in your 20s, the premiums are much lower. As your age increases, so do the premium amounts.

I strongly recommend getting a term insurance plan to secure the financial future of your family or loved ones. It's a small step today that can make a big difference tomorrow.

Term insurance is not just a financial product; it’s a promise of protection for your loved ones. As life becomes more unpredictable, securing your family’s future should be a priority. With affordable premiums, extensive coverage, and multiple benefits, term insurance is essential to financial planning.

Remember, by investing in term insurance today, you’re giving your family the gift of security and peace of mind for tomorrow. So don’t delay—take the step now and ensure your family’s future is safe, no matter what life throws your way.