In today’s testing times, a life insurance plan is the need of the hour, and the ongoing coronavirus pandemic has only made the need more obvious. We could all use a little help when it comes to starting with financial planning early in life and being on the right track with our investments before retiring.
Moreover, the onset of coronavirus and the global pandemic has made it all the clearer to everyone that term insurance is not just a tool to save tax but an ideal solution to planning for your family’s financial independence.
You can buy a life cover for your family, which they will receive if you do not survive the term insurance policy period. Not only will you be able to help your family with finances but also support them in this emotional time where they have suffered the loss of a loved one.
If you are all set to buy a term insurance policy for yourself, then here are a few pointers that can help you plan your finances better:
- Evaluate Your Expenses And Liabilities
Before you begin your investments and portfolio creation, it is imperative to know about pending expenses in the family. Some expenses like day-to-day purchases, monthly expenses to run essentials in the house, credit card bills, etc., are more short-term expenses.
On the other hand, there are liabilities like EMIs on your home loan, saving towards your child’s further studies or marriage, which are more of long-term expenses. Besides these expenses, there is always the uncertainty factor that cannot be accounted for. This is where you can stay ready by stashing some cash aside to help on those rainy days.
2. Add Insurance To Your Portfolio
Planning your finances is not just about investing in instruments that can help you create wealth but also buying protection and security for yourself and your loved ones.
If you want to take care of your family and provide for them financially even in your absence, then a term insurance policy fits this situation just right. However, there are many insurers out there that offer ideal term plans with various benefits and running a term insurance comparison would only make sense in this situation.
When it comes to buying a term insurance plan, make it a point to do your due diligence and shop around. Get quotes from leading insurance companies and compare the term insurance plans of different insurers. Know which insurer has a better term plan benefit, higher claim settlement ratio, riders that would prove useful for your family, etc.
3. Choose Your Policy Term Wisely
Simply put, if you are in your 20s or early 30s, then you need to be eyeing a period of 30 years or more since the real need for life insurance over will be more at the later stages of your life.
Moreover, if you are the only income earner in your family, then choosing a longer period for your term insurance would be ideal. If you are in your 40s or 50s, then you should consider your responsibilities and keep your spouse, children, and parents in mind while you gauge the right policy term for your term insurance.
4. Consider Adding Riders To Your Term Insurance Plan
From accidental benefit to partial or complete disability and from waiver of premium to opting for a survival benefit term plan, you will have many options to pick from. Remember to customise your term insurance plan keeping your needs in mind and anticipating your family’s needs in the future as well, because an additional rider can make your policy solid.
You can choose riders like the critical illness coverage, as it can help you take care of your medical bills during an emergency.
5. Claim Tax Benefits On Your Premiums
A term insurance policy not only financially secures your family’s future but also your present in a way. The premiums you pay towards your term insurance plan are tax-deductible up to Rs. 1,50,000 per annum, as per the old tax regime under section 80C of the Income Tax Act of 1961.
Additionally, the death benefits offered by a term insurance plan are also tax exempted under section 10D in most cases. Ensure that you renew your policy every year as if you miss out on paying your premiums and your policy stands expired, then you cannot claim a tax deduction for that year either.
It is important to understand the need for investing better and creating a financial plan at the right time. If you have planned your investments in advance, then you will be able to reap the benefits as well as reduce risks for yourself and your family members.
Consult an insurance advisor and use a financial calculator to understand your financial needs and plan your investments accordingly. Buy the right term insurance plan to secure your family’s financial wellbeing and gift them a worry-free life, even in your absence.