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Milestones like your first job, the birth of a child, buying your first house, etc., can all impact your financial goals and heavily influence your decision when deciding on your term plan coverage. Moreover, the importance of term life insurance can not be stressed enough at these stages.
Your needs and goals will evolve as you mature and progress through life. These stages can include your first job, marriage, the birth of a child, buying a house, and more! So, you must acknowledge and consider these milestones, as they can also impact your financial goals.
Similarly, these factors can also impact how you choose your term plan coverage, as you may have a family to support later in life. Read on to learn the importance of term plans at each life stage with Tata AIA!
Term Insurance Importance at Each Life Stage
Term insurance policies offer pure risk coverage at each life stage. Some plans even offer a Life Stage Benefit that allows you to increase your sum assured by a certain percentage at each milestone, like marriage, birth/adoption of your first child, buying a house, etc.
To help you decide on a sum assured amount, here are some common examples explaining the importance of term life insurance at each life stage:
When You are Young and Single
Your 20s and 30s are the best time to start saving and planning for your future. It is also the best time to buy a term insurance plan with a larger sum assured, as premiums are cheaper for younger policyholders and will stay the same throughout the policy's term.
For example, you can buy a 1 crore term insurance at a lower premium in your 20s than you would in your 40s despite buying the same coverage amount.
We recommend getting riders# like a Life Stage Benefit and a Return of Premium Benefit (ROP) so your sum assured can be increased accordingly with each life stage and a survival benefit from the ROP feature.
When You Get Married
Young couples and newlyweds often buy term plans as a form of income protection. If the insured spouse passes away, the dependant spouse can use the sum assured to pay for living costs and to pay off existing debts/loans.
For example, if you took out a home loan that will take 10 years to pay off, then getting a 10-year term plan can be beneficial as your spouse can use the sum assured to pay off the loan in the event of your passing during this time.
When deciding on a sum assured, account for your household's annual income, current living expenses, future expenses like a house, car, children's education and existing liabilities like loans/debt that need to be paid off – to get an accurate estimate.
When You Start a Family
The importance of term plans shines the most when you have children or have growing children who are yet to be independent. The death benefit can be used to fund their education and other living expenses and keep them financially secure until they can start earning an income.
When buying a term plan, it is important to assess how many dependents you have so that you can accurately determine how large of a sum you will need to financially secure your family.
When You Retire
Although a pension or retirement plan may be better suited at this stage of life, a term plan can still be beneficial.
You can opt for a Zero Cost Term plan where you can exit the plan at a certain age before the policy term ends and get paid all the premiums paid minus the GST@. Note this is different from a TROP.
These can be beneficial if you feel that you no longer want to pay premiums past a certain point and have already settled any outstanding payments or debts.
On the other hand, if you still have existing liabilities or children who are yet to be independent, getting a term plan with a life cover option can be beneficial.
Conclusion
As you can see, the importance of term plans is applicable to almost every life stage and is well worth the purchase given the financial security it offers. Moreover, getting riders# like a life stage benefit, ROP and whole life cover can help you maximise the benefits offered under term plans.
You should note that insurance providers usually decide a life insurance's important terms and stages. Hence, it is important to read the policy wordings of term plans and their riders before purchasing to determine their premiums and benefits accurately.
