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Need assistance in choosing the right insurance plan? Get a call from our Expert.

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How to Become Financially Responsible with a Term Insurance Plan?

Becoming financially responsible or independent is a goal for every individual. Financial independence entails choosing the right portfolio for investment, ensuring optimum savings, keeping a track of the budget and buying the right health and life insurance plan. And, if you are looking for extensive coverage with your life insurance plan, a term plan can be one of the most important elements in the financial portfolio.
 

Term life insurance ensures financial security to your family members in your absence. It can provide the necessary financial resources in varied dimensions. So, how to use the term plan in the best possible manner for maximum protection and benefits? Before we get ahead, let us understand what a term plan means.
 

What is a Term Plan?
 

A term insurance plan is the purest form of a life insurance policy that provides a death benefit to your beloved family members in the event of your unexpected demise during the policy term. It is considered extremely affordable for more sum assured.
 

As term plans are pure protection plans, they do not offer any maturity or survival benefits. However, insurance companies have started offering term insurance with a premium benefit that offers the sum of all premiums paid as a maturity benefit to the policyholder.
 

The plan additionally provides rider# benefits that can ensure further financial assistance during extreme medical emergencies such as getting diagnosed with a critical illness, being in an accident that leads to disability or death, etc.
 

How to Become Financially Responsible with a Term Plan?
 

Becoming financially responsible takes a lot of effort. However, a well-defined term plan can make it easy for you.
 

  1. Make a financial plan to decide on the sum assured - You can get the desired sum assured even with the most affordable term life insurance. So, primarily you have to take time to make a financial plan based on your income and family financial commitments.

    If you are the sole earning member, you should calculate the fund required by your family in the event of your unexpected demise to pay for your debts and other daily routine expenses.

    You can consider the increasing responsibilities at different stages in your life along with the inflation rate to estimate the right lump-sum death benefit.

  2. Invest early - If you want to maximise the benefits of affordable long term life insurance to ensure financial independence to your family, investing early in life is a key criterion. You can purchase the term policy at a cheaper rate and become financially responsible with ease.

    At a younger age, you will develop the discipline to allocate a fund for your financial security.

  3. Add-on rider# preferences - Becoming financially responsible involves taking the necessary financial action in a medical emergency. It will help you save a lot of your earnings reserved for your family expenditure.

    For instance, if you get diagnosed with a critical illness such as cancer, you will lose a large sum of money for your regular medication. If you had purchased a term plan with health riders#, you would get a lump sum benefit for handling your medication when diagnosed with a critical illness or a terminal illness.

    You can opt for regular premium payment if you feel spending a large amount at an instant may not be a wise decision. There are also rider# options to waive off future premium payments if you get affected due to a total or permanent disability.

  4. Whole life cover - If your family is completely dependent on your income for their survival, then you can take the whole life cover option and extend the insurance benefit until death. It will provide the death benefit in case of your death at any stage in your life.

  5. Return of premium2 benefit - So, what is the benefit of surviving through a term plan? Have you been introduced to the return of premium options? For instance, with the return of premium2 option in TATA AIA, you will get a complete refund of the premium amount as a survival benefit when the plan matures. This way, you not only get an extensive life cover at affordable premiums, but you also get the sum of all premiums you paid as a maturity benefit. Life insurance does not get better than this!

  6. Inclusion of family members - When you plan for a life cover, it is equally important that you include your spouse if they contribute to the financial requirement of the family. It applies even if your spouse is a housewife.

    The reason is that when your wife is a housewife, they take up certain household chores such as washing clothes, utensils, cooking, etc. In the event of her sudden demise, you will have to find a replacement by employing a person for the same work at home, and you need to pay for it!

    You can always increase the life cover when married by using the joint-life option with a term policy.

  7. Tax* benefits - Being financially responsible means making effective use of your financial resources. So, with a term policy, you can get tax* benefits for the premium and the returns in the form of tax* deduction and tax* exemption based on the Income Tax Act, 1961.
     

Therefore, based on your age, gender and the quantum of financial support you offer for your family, you can decide on the sum assured, policy term and the rider# benefits using the affordable term plans in India.
 

Conclusion
 

Term insurance plans have plenty of benefits. It can make you financially responsible at an early stage in your life by providing varied, flexible benefits. However, it is your responsibility to use the features appropriately and enhance the returns greatly.
 

Choose a longer policy term, opt for a term insurance plan with critical illness benefit if your family medical history deems it important and stay invested in ensuring the lump sum death benefit for your family. And, most importantly, purchase it early to use the easy affordability of term plans!
 

L&C/Advt/2022/Nov/2726

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimers

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not guaranteed issuance plans, and they will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility for tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
  • #Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch
  • 2Return of premium shall be the return of Total Premiums Paid (excluding loading for modal premiums and discount) by the policyholder at the end of the Income Period