How Does Term Plan Premium Vary at Different Life Stages?
Most people think of financial planning primarily as a two-pronged strategy. One is managing current income and debts, and second, saving and investing for the future. However, there is another component to a comprehensive financial plan that we generally overlook: life protection. It is here that the term insurance plan comes in.
If you wonder what is term plan, then think of it as an umbrella shielding your family against the heavy rains in your absence. These rains comprise of the financial burden that your loved ones may face without you. The prime purpose of buying term insurance policies is the financial safety of the family for a long duration.
Your dependants will receive a death benefit to sustain themselves financially as defined by the policy terms and guidelines set by the Insurance Regulator. Preferably, the ideal time to buy a term insurance plan is at an earlier stage of life. Although most people buy early, the rest acquire these policies only in the later stage in life. However, it is crucial to note that buying a term insurance policy early is appropriate as it ensures the accomplishment of your life goals with ease.
You should note that with every stage of your life comes a different set of responsibilities and financial needs. Thus, it will be beneficial for you to consider these changing needs before selecting a term insurance plan. The following pointers on how to buy term insurance at different stages of life will help you understand its importance better:
In Your 20’s
Multiple situations describe the importance of having a term insurance plan in your 20’s. You are fresh out of college and are still young. But you might have borrowed loans to cover your higher education. And it is expected that you would want to pay off these loans when you get a well-paying job. But if some unforeseen situation occurs and something happens to you, the responsibility of paying these loans will fall on your parents. Thus, it is advisable to buy at the start of your career.
The premium amount will be low, and your parents will not have any pending obligations in case you are not around. The best term plan for you would be the one that offers an option of lumpsum payout.
In Your 30’s
A stage ahead in life, you may probably get married in your 30’s. As a newlywed, you might want to opt for a term insurance plan that provides income protection for your partner. And as soon as you grow your family, you would need adequate cover for your family. It will protect them against the increasing financial liabilities that may fall on your partner’s shoulders if something happens to you.
Apart from this aspect, when you are in your 30’s you and your partner may make investments in your new life together. You may buy a car or house, which would require a considerable amount of money. Thus, it would help if you opted for the best term plan to suit your needs and make sure that your family is not burdened with debts in your absence.
The best term plan would be one that provides basic life cover and increasing monthly income. It will allow your family to avail of the plan’s financial benefits without worrying about inflation.
In Your 40’s
Once you have kids, their dreams become yours. You would want to do everything possible to help them achieve their full potential. There will be expenses regarding their higher education, lifestyle needs, or marriages. The best term plan covers them all. Thus, select a term insurance policy with an adequate sum assured to cater to all these expenses. Preferably, the coverage should be at least 15- 20 times your current annual income.
If some untoward situation occurs, the children’s needs and dreams will not get crushed. The best term plan will ensure that they can continue living their normal lifestyle and not compromise on anything.
In Your 50’s
As you continue to work in your life, you also plan to save enough funds to support your retirement years. Like anyone else, you, too, might want to spend the golden years of your life without any financial worries. In this situation, buying a basic term insurance policy might not be as helpful as it would not offer maturity benefit. A sensible choice of term insurance would be the one with a return of premium option.
Further, at this stage in life, the occurrence of a critical illness is a high possibility. It can drain all your savings to get the necessary treatment. And it may also cause a financial burden to your family while they take care of your well being. A simple way to prevent it is to opt for a critical illness rider while buying a term insurance plan.
With this rider, you will get a critical illness sum assured if you are diagnosed with an ailment within the policy period. You can then get the best treatment without compromising your savings.
Summing it up, term insurance plans are designed by understanding your responsibilities towards your family. Hence, they work for their betterment. Irrespective of age and income, you need a constant support system to remind you to keep going and term insurance does that. It lets you plan your future without any hindrance.