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With Term Life Insurance, you take 100% Responsibility of your Family

Rohit Sapra Rohit Sapra 28 February 2018

Choices in life do matter! Given a choice, will you choose happiness for your family for the rest of their life in your absence or would you want to save a negligible amount which makes no difference in your absence?

How term life insurance assures financial security of your family

Life is full of contradictory behaviour and decisions, and what better way to prove it than by answering a few simple questions:

  1. Do you want to see your parents, spouse and children happy forever? The obvious answer would be YES.

  2. Have you protected your family with a term life insurance plan? Here, you would definitely get the contradictory answer NO. Even if we do get a YES; we can further probe by asking.

  3. Have you covered your family adequately? Again a majority would answer this as a NO.

So have you ever wondered, why do we see this contradictory behaviour? The honest answer is that your love-filled heart always wants the best for yourself and your family. But, the rationally thinking brain puts hurdles of logic and reasons in your decision path.

The same is the case while buying a term life insurance plan which helps in taking the full responsibility of your family even when you are not there anymore. The rational brain tells, “You are not going to drop dead tomorrow morning while rising out of the bed, so why hurry in buying a term life insurance plan, there is still time.” Or like, “Term Life Insurance plans are a complete waste of money, instead, put that money in a bank fixed deposit and you will end up with much more.” And so on . . .

The majority of the people who have answered YES, for all the above questions, have already fulfilled their responsibilities 100% by buying a term life insurance plan. They are either aware of the benefits of a term life insurance plan or have actually seen the surviving family members of their friends/colleagues/relatives face the harsh financial crisis arising due to an early death of the sole breadwinner.

Let me tell you how you can fulfil your responsibility towards your family with a term life insurance:

What is Term Life Insurance?

A Term Insurance Plan is the most basic, pure vanilla, no frills, and pure risk insurance plan. Under this plan, the insurance company pays the agreed life cover amount known as sum assured on the death of the life insured. In turn, the life assured agrees to pay a fixed amount in the form of premium every year for the defined coverage period.

In case the life insured survives till the end of the defined coverage period, nothing is paid back to the life insured.

How does a Term Life Insurance Help You?

  • Replacement of the Sole Bread Winner: Under a term life insurance plan, the life insured gets a high amount as life cover. The amount paid as death benefit on the unfortunate and untimely death of the sole earner of the family acts as an income replacement source.

    To undertand this, lets take an example: Suppose, you are 35-year-old and the sole breadwinner of your family. In order to protect your family against any future financial problems due to your untimely death, you have taken a term life insurance plan for a sum assured of Rs. 1 crore, and a policy term of 30 years. Your current annual income is say Rs. 4 lakh, and suppose you die unfortunately say during the 4th policy year.

    Then, the life insurance company will now pay the entire life cover amount of Rs. 1 crore as the death benefit to your nominee. This lumpsum payout of Rs. 1 crore will act as an income source for your family's future. This payout will ensure that your family does not miss their sole breadwinner on the financial front and can live a comfortable life by maintaining their current lifestyle. Thus, a term plan shoulders your financial responsibilities in your absence.

The ideal life cover amount for your term life insurance plan should be 15 to 20 times or more of your annual income, but not less.

  • Home Loan & Liability Repayment Tool: The death benefit payout from a term life insurance plan can also act as a tool for your Home Loan repayment by your family members in case of your untimely death.

    Let’s say, you have taken a home loan of Rs. 50 Lakhs and you had also covered yourself with a term life insurance plan. In case of your untimely death, the insurance pays the life cover amount of Rs. 1 crore. Your family members can use the proceeds from this lump sum amount to pay off the outstanding home loan.

    The remaining amount can then be used for living a worry-free life without the burden of a home loan. The Lumpsum payout received from the term life insurance plan can also be used for repaying your other outstanding liabilities and debts say like overdue credit card payments, outstanding car loan, two-wheeler loan or any other liability for that matter.

    A term life insurance plan can help in paying off every outstanding due in the absence of the sole breadwinner and save the family from sinking into a huge debt trap and the consequential emotional turmoil as well. However, it is best recommended to have a separate term life insurance plan to cover your outstanding loans and debts. The life cover amount of this plan should be either equivalent or higher than the total payable amount of your loans and liabilities.

Now, after looking at all these benefits you might be thinking, how much will a term life insurance plan cost you?

Well, you can relax, a term life insurance plan is very cheap and you won’t feel it as a burden on your income. The main reason, term life insurance plans do not have any investment or saving component in them, due to which they do not pay you back anything at all if you survive the defined policy term. However, this kind of setup also allows term life insurance plans to provide you with a very high life cover at very nominal rates.

So, if you are a 30-year-old healthy male who does not consume tobacco in any form, you will be considered a non-smoker by the insurance company. So, if you opt for a term life insurance plan of Rs. 1 Crore for 50 years i.e. till you become 80-years-old, you would be paying Rs. 730 per month only. Now, this literally comes to Rs. 25 per day. If you still don’t believe me, you can check it out for yourself right here.

You can also save money on your the taxable income by getting a deduction up to Rs. 1,50,000 under Section 80 C on the premiums that you pay for your term life insurance plans. To add to it, the death benefit paid to your loved ones under the term life insurance plan is also completely tax-free under Section 10 (10D).

Food for Thought

So, do not dwell too long on that decision of providing a complete protection to your family. Not only are the premiums of a term plan affordable, but it also provides you with a sum assured that is good enough to provide for your family for a long period of time, pay off your outstanding loans and liabilities in your absence. Buy a term life insurance NOW and take 100% responsibility of your family!

Rohit Sapra
Written by Rohit Sapra
Rohit Sapra, a licentiate, and currently an SME, is a seasoned insurance professional with previous work experience from Kotak and Birla Sun Life Insurance.