Understanding Term Insurance -Part 1

What is Term Insurance?

Term Insurance is an important step in Financial Planning. Have you ever thought of a situation that being a primary caregiver, God forbid if anything happens to you how will your family cope with the situation?

Although your presence can never be replaced with any instrument, but it shouldn’t stand between the dreams, aspirations, needs, and comfort of your family.

In simpler words, term insurance is life insurance that covers your family's financial needs if you’re not around tomorrow. With a minimum premium paid on a fixed frequency, it can provide for your families’ needs in both the long and short term. It is one of the cheapest ways to provide financial security against life risk.

It works in a manner that if something happens to you within the term of the policy, it provides your family with a lump-sum amount that will cover their financial needs and not let it become a hindrance in whatever they want to achieve.

It is one of the important and the first step to begin financial planning.

Now that you understand term insurance, let’s discuss on Do you really need one?

You should buy a term insurance plan if it fulfills the below criteria:

• You’re the sole bread-earner of the family and you have family members that are dependent on you. Might be your children or your retired parents in this case

• You have taken a large amount of loan and the repayment burden could dent the financial well-being of your family

• Haven’t saved enough for future events like children’s education, wedding, and unforeseen medical emergencies.

Let’s look at some of the cases to better understand the situations:

Arjun, 27 years (Married) – Only earner in family and your spouse and kids’ future depend on you.	Freya, 28 years (Unmarried) – Have a home loan and you have dependent parents.	Aman, 30 years (Unmarried) – You don’t have any dependents, your parents are retired and financially independent.	Hemant, 32 years (Married) – You don’t have any kids and your spouse is financially independent.
​Needs a Term Plan	​Needs a Term Plan	Does not need Term Plan	Does not need Term Plan