Life Insurance

Why Term Plan Should Be The First Step To Securing Your Future

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Your parents keep urging you to start investing for your future needs. Then, there are regular newspaper, radio and television advertisements of companies asking you to opt for their investment products. Like many others, if you get motivated to start investing, remember to avoid a common oversight of ignoring adequate life insurance protection for family members before any investments. Just in case you are wondering why, you need to read on.

Why life insurance before investment A part of your regular pay is required to meet regular expenses such as groceries, rent or home loan EMIs, mobile services, children’s school fees and so on. What you save can typically be earmarked for imminent purchases like gadgets and future needs like children’s higher education and retirement. Now, imagine a situation where the regular income suddenly vanishes. This happens due to the sudden demise of the family’s major or only income earner. In such a situation, the only way to meet immediate needs is to dip into savings.

If the situation of low or no new source of regular family income continues, the family would need to liquidate investments for future needs. Since, the liquidation is typically done under duress this may have to be done at a loss. This is especially true for market-linked investments due to less-than-favourable market conditions or due to penal conditions for premature exits.

The most compelling argument in its favour of life insurance preceding any investment is that even the best performing investments typically can’t meet a family’s present and future needs on the demise of the major or only income earner. If a person, who expects to work till age 58, dies at age 28, the family needs adequate resources to replace the loss of income from 30 years of work life. Even the most outperforming investments can’t create that amount of financial resources. It is only a life insurance plan that provides adequate life insurance coverage that can help and fill the void. It is here that a term plan is ideal to have. If you are wondering why, here are some compelling reasons.

Term plan advantage Among life insurance plans, term plans typically provide the highest life insurance coverage at the most affordable premiums. This is useful in early work life where you need to both get a high level of protection and get started with investments, besides meeting regular expenses. Thanks to low premiums, that remain the same for the whole term that can stretch to 25-30 years, you have more savings at disposal for investments. This is especially so for investments providing high growth in the long term, especially equity and equity-oriented investments. This advantage continues to accrue to you even if you increase your life insurance coverage subsequently as your regular income and savings goes up.

When you have a term plan, in case of an unfortunate event, investments earmarked for long-term needs are secured. The protection from the term plan can be further enhanced by attaching riders for risks such as accident and critical illness for additional and affordable premiums.

Clearly, term plans not only protect your family in its hour of greatest need but also protect the investments that you diligently make over time for the future of your family members. They are like the car seatbelts. They protect the investments during your family’s financial journey. That’s why before you start your financial journey you need to belt up with a term plan. 

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