Financial planning is a critical aspect of life. Whether you have a single or multi-income family, you need to secure the future finances of your loved ones, lest the unpredictability of life delivers an unperceivable surprise. One of the best ways to do this is to purchase a suitable term insurance plan.
What is term insurance?
Term insurance is an affordable form of life insurance policy. These plans are uniquely designed for the well-being of Indian citizens. Term insurances are available for high sum assured and low premiums with a flexible tenure. You can choose anything from 30 lakhs or 50 lakhs to 1.5 crore term insurance plans or even higher for 10-100 years.
Term insurance policies are innovative solutions to tackle the economic uncertainty today. While a single person term insurance can be a viable solution, the unpredictability of life can impact anybody. Therefore, the smarter solution is family term insurance.
A family term insurance plan allows you to cover the mortality of a number of family members under a single policy. The accumulation of policyholders also facilitates a lower premium as compared to an individual plan for each member. You can insure the financial future of multiple nominees under the plan with a high sum assured.
Benefits of Family Term Insurance
A family term insurance plan is a one-stop solution to several financial and personal concerns. Here are the major benefits of family term insurance policies:
- It allows you to conjugate the policy terms and premiums of individual policies under a single plan, thus streamlining your payments.
- Term insurance is naturally available for lower premium rates. When you combine the plans for individual family members under a term insurance policy, the overall premium is even lower on average.
- You can rest assured that if primary family members meet their untimely demise, the children’s future will be protected with a lump sum death benefit.
- You can add riders to increase the coverage. Family term insurance, much like individual policies, allows you to add riders for accidental death, critical illnesses, etc. Therefore, in moments of financial distress, family members can claim these benefits to pay massive hospital bills to a large extent.
- There are huge tax benefits to having family term insurance. Not only do you save on premiums, but you can also save on income tax. Under Sections 80C, 80D, and 10(10D), if your overall premiums are less than 10%, or 2.5 lakhs annually, you are entitled to tax exemptions. You can even claim tax benefits on family term insurance riders. Up to INR 25,000 of the premium is deductible if family members are less than 60 years old, and up to INR 50,000 is deductible for family members above the age of 60.
- Family term insurance plans are available in many types. If you opt for term insurance with a return of premium, you can build a substantial corpus upon surviving the policy tenure. TROP repays the premiums you paid over the years for the term plan. The premium for family term insurance will be substantial. Therefore, when the policy matures, you may receive a lump sum amount to tackle financial situations or prepare a bigger financial safeguard for the future.
Family term insurance plans are available for varying amounts. You need to choose the type of policy and sum assured that adequately meets the needs of your family.
Choosing the right coverage for family term insurance
The coverage plays the most important role in a term insurance policy. It helps your family cope with liabilities and other financial burdens of future planning. Therefore, it is important to choose sufficient coverage.
Let’s assume you purchase a 1.5 crore term insurance plan for your family. You need to evaluate if INR 1.5 crore is sufficient to cover the following:
- Monthly expenses for at least 6 months while family members contemplate and plan future earning potential.
- Outstanding liabilities such as home loans, car loans, health insurance, personal and professional debts, etc.
- Education or professional goals.
- Dependents are entitled to the claim settlement.
- The rate of inflation.
A 1.5 crore term insurance plan offers a high death benefit. For middle-class families, the amount may go a long way to tackle financial burdens. However, if you have a high-income family, 1.5 crore term insurance plan may not suffice. You may need options with higher sum assured such as 5 or 10 crore term plans.
If the 1.5 crore term insurance plan is sufficient to meet the financial goals of the family, you also need to consider which type of plan would benefit them most. Based on a careful examination of the different types of family term insurance and their benefits, you can make an informed decision for your family.