DIY Financial Plan step 4:
Significance of TERM LIFE INSURANCE
DIY Financial Plan step 4:
Significance of TERM LIFE INSURANCE
Reading Time: 2min 11sec
Embedded Files
Significance of TERM LIFE INSURANCE
03-Mar-2024
Introduction
Introduction
Life is the most precious gift one has, and yet it can be unpredictable at times, with COVID as its best example in the recent past, which took over 70 lakh lives around the world and 5 lakh lives in India! Even post-Covid, we keep hearing news of how people are dying of sudden & silent heart attacks!
Imagine the impact on the lives of your loved ones, if something were to happen to you unexpectedly.
Importance of Term Life Insurance
Importance of Term Life Insurance
Term Life Insurance serves as a crucial safety net, providing financial protection to your family in the event of your untimely demise.
In such circumstances, a term life insurance policy ensures that your dependents are not burdened with financial liabilities, such as outstanding loans, mortgages, or education expenses.
Moreover, term life insurance premiums are relatively affordable in today’s time with so much flexibility available in payment plans, that one can easily take it and protect their loved ones or dependents.
Let's understand this with an example
Let's understand this with an example
Consider the Singh family, a middle-class household residing in a suburban neighborhood.
Mr. Singh, the primary breadwinner, tragically passed away in a car accident, leaving behind his wife and two young children.
However, Mr. Singh had the foresight to purchase a term life insurance policy with adequate coverage. The policy's lump-sum payout provided the Singh family with much-needed financial stability during their time of grief.
It covered outstanding debts, ensured the children's education expenses were taken care of, and allowed Mrs. Singh to maintain the family's standard of living without financial strain. Yes, the grief is irreplaceable for the family, but at least money can solve many life problems for them!
What is the right amount?
What is the right amount?
Determining the right amount of term life insurance coverage requires careful consideration of your family's future financial needs.
Experts recommend calculating the sum required to meet future goals, such as children's education, marriage expenses, mortgage payments, and daily living expenses. (How to calculate the value of your future goals is something we will talk about in our upcoming blogs!)
Deduct the sum already accumulated through existing savings, investments, and any employer-provided life insurance coverage.
The resulting figure represents the optimal amount of term life insurance coverage needed to bridge the financial gap and secure your family's future.
Never mix LIFE INSURANCE WITH INVESTMENT!
Never mix LIFE INSURANCE WITH INVESTMENT!
Never fall for the plans where insurance is linked with investments! Those are usually called ULIPs or Endowment plans, where the person will throw magic numbers in front of you! One example would be “Invest 1 lakh each year, for the next 5 years, and then get 10 lakhs in 16th year! Your money just got doubled in 15 years”.
While in reality, you received only 5% returns every year on average. A good FD can provide you with 7% returns! So, always ignore such schemes, these are nothing but bogus, which charge huge commissions, eventually making the commission guys rich, not us!
Conclusion
Conclusion
In the realm of personal finance and wealth management, term life insurance provides peace of mind.
As a personal finance educator, I urge individuals to prioritize term life insurance as an essential component of their financial strategy. Remember, investing in term life insurance today ensures a secure tomorrow for your family, regardless of life's uncertainties.
Share
Page updated
Google Sites
Report abuse