Why Term Life Insurance Is a Must in Every Financial Portfolio

When we think about the future, it’s with big dreams in mind. We look forward to purchasing a luxurious house, walking our kids on their graduation day from top-notch colleges, or having a relaxed retirement with few worries in a small, peaceful town. It is through bank deposits, gold purchases, and stock market investments that we keep our hopes alive.

However, there is one major question that we usually postpone: What will happen to our dreams if we are no longer alive to give them a chance?

And that is the moment when term life insurance can be very helpful; it provides a protection cover for your family most easily and genuinely possible. In fact, if you are looking forward to owning a financially resilient “house,” then term life insurance stands for the firm foundation that will hold your “house” in place. Hence, the entire “house” is jeopardized if the “foundation” is missing.

What is Term Life Insurance in Simple Terms?

Term life insurance, in the simplest of terms, can be defined as a binding agreement between you and an insurance company. For a relatively small amount of money that you pay each year (referred to as a premium), the company, on the other hand, promises to provide your family with a huge amount of money if you die during the “term” of the policy (i.e., the number of years the policy is in effect).

Typically, other plans that bring about a mix of “saving” and “protection” try to combine both. In this case, it is just the opposite: only protection is provided. It is so simple that you don’t even have to do any complicated calculations or worry about traps hidden in fine print. The bottom line is that you are paying for a “safe mindset.”

What Makes It a “Need” for You?

Family is the foremost consideration in India. Every day, we strive to provide the best of comforts and living standards to our parents, spouses, and children. So, the question boils down to this: Why do you need life insurance in your investment portfolio now?

1. High Protection at a Very Low Cost 

It is definitely a wonderful option where you can get so much value for such a minimal price. So, if you simply want protection and do not consider it an investment, the cost will be unbelievably low. For the price of one family dinner at a restaurant or a couple of movie tickets, you can get coverage of ₹1 Crore or more.

2. Paying off your debts

Most of us borrow a loan to buy a new house or car or to change our lifestyle. Borrowing loans is okay as long as you are paying the monthly installments regularly. However, if you pass away, your family will be burdened with those loans. Without any income, they may even have to give up the house or the car. Life insurance helps your family to pay all the debts and live in the home with dignity.

3. Ensuring Your Child’s Education

The fees of Indian education are shooting up. It is not only the schools and universities but also the coaching centers for various entrance exams. So, you need a lot of money for it. If you equip yourself with term insurance, the death of the main breadwinner will not stop your child from getting educated and becoming a doctor, engineer, or artist. Instead, the insurance payout can serve as a “school and college fund” for the kid.

4. Tax Saving

Buying term insurance will result in the premium paid by you being deducted from your taxable income under Section 80C. Your family receiving the sum assured will not be taxable most of the time under Section 10(10D). So, you earn while you are present in the world, and your family remains secured after your demise.

Why “Simple” is Better Than “Complex”

Many people in India purchase insurance through “Endowment” or “Money-Back” policies. One reason for their attraction is they get some money back if they survive the policy term. However, these plans tend to be costly and provide inadequate protection.

For instance, it is not uncommon to shell out ₹5 Lakhs annually for a traditional policy to get a ₹1 Crore cover. Not many people can afford that. On the contrary, with term life insurance, a fit 30-year-old might have to pay only between ₹10,000 and ₹15,000 annually for the same ₹1 Crore cover.

You are better off segregating your insurance from your investments. Acquire a term insurance policy for your protection and invest your spare money in a bank or mutual fund for growth purposes.

How Much Cover Do You Really Need?

One of the simple ways for Indians to decide the sum assured would be to have 15 to 20 times their annual income as the coverage.

For instance, if you make ₹10 Lakhs per annum, you must go for a minimum sum assured of ₹1.5 Crore to ₹2 Crore. This means that simply by placing the amount in a bank and using the interest alone, the family members can be financially stable, buying essentials like food, electricity, and clothes.

When is the Best Time to Buy?

The perfect time was the day before yesterday. The second best time is today. With aging, our health risk increases, and so does the policy’s cost. If you grab it while you are in your 20s or 30s, you are essentially “locking in” the low price, which will remain stable for as long as the policy is active. So even if you become sick later, the company still can’t hike your premium.

Conclusion

Life is beautiful and full of surprises. We never know what will happen next, but we can definitely ensure that our family is well taken care of. You may think that term life insurance is for you, but actually it is for your loved ones. It is a commitment that even if something were to happen to you, your spouse wouldn’t have to ask for someone’s help, your parents will have their medicines, and your children will have their books.

When you include life insurance in your financial portfolio, it is one of the most unselfish and wise investments you can make. It is also considered as the greatest security gift. Don’t expect a “sign” to protect your family. Take actions now, keep it simple, and be confident that your loved ones are safe.