Term Insurance for parents in India - What, Why, Importance?

Term Insurance for parents in India

Term Insurance Plan

Being a parent is a huge and significant transition in one’s life. The moment you welcome your little bundle of joy into your life, your responsibilities increase and so, also increases your expenses. In addition to the moral responsibilities of providing a good upbringing to your child, you have to bear the financial responsibilities as well. 

Raising kids is an expensive affair today. The expenses related to their education, lifestyle, wedding, etc. are very high nowadays. In such a situation, it is quite necessary to have a term insurance plan to ensure the security of your children’s future in case of occurrence of an unprecedented incident. Bad time in life never comes with prior notice and you should ensure that your loved ones, dependents are financially secured in your absence.

What is Term Insurance Plan?

Term Insurance plan is a life insurance policy which helps in providing comprehensive financial coverage. The term insurance plan helps in securing the financial lives of your loved ones by a lump sum payment on your untimely demise. This lump sum payment is known as death benefit and will help in fulfilling the financial needs of your child and your family.

The term insurance plan is one of the most popular and affordable life insurance plans available in the market. The most important feature of the term insurance plan is the coverage provided for a fixed amount of sum insured, for a fixed time on the payment of reasonable premium. 

Importance of Term Insurance plan

Let us find out why term insurance plans are important and what are the benefits they can offer?

Death Benefit

In case of your unprecedented demise, the lump sum payment made to your family in the form of the death benefit can help in paying off all your loans and liabilities. Your family can lead a life of respect and pride even after your unfortunate demise.

High coverage

Term insurance plans are a popular choice amongst common people as these plans provide a high amount of coverage to your family members. This will ensure the financial security of your child and family even when you are not with them.

Reasonable premium 

The high coverage and benefits of the term insurance plans can be availed at the payment of a reasonable premium.

Multiple options for premium payment

You can have multiple options for the payment of premium depending on your financial conditions. Usually, premium payment can be made in numerous ways such as either in a single-time payment or in the form of instalments i.e. monthly, quarterly or half-yearly.

Tax benefits

Under Section 80C of the Income Tax Act, 1961 you can avail a tax benefit up to Rs. 1, 50,000 on the premium paid for a term insurance plan. Moreover, your nominee can also claim tax benefits on the sum assured received on your untimely demise.

Additional benefits

Your family can avail certain benefits in case of a critical illness or disability suffered by you. Your child and family can obtain supplement income if there is a loss of income due to an accident or a disability. Also, you can obtain a lump sum amount on the diagnosis of a critical ailment.

Why term insurance plans are a must-have for parents?

As said earlier, your responsibilities grow with your transition into the role of a parent.  After being a parent, you will have different goals at different stages of your life. Every goal like your child’s schooling, child’s higher studies, etc. needs a considerable amount of money. In such a situation, if there is a mishappening and you are no longer with your child, then the dreams of your child such as higher studies from an eminent institution or a decent marriage should not remain unfulfilled.

Term Insurance plan will act as a replacement tool for the income earned by you on your untimely demise. So, in case of an unexpected incident, a term insurance plan purchased by you will ensure that your child's dreams are not shattered and he can have financial support even when you are no longer with him. In case, if you and your spouse are both income-earning members then you both can purchase term insurance policies for your child and create a corpus for his bright future.

Moreover, you might invest other avenues such as Public Provident Fund, shares, mutual funds, etc. which can give you huge returns. But, these investment avenues are self-funded and you need to be alive to keep on investing in the avenues to make the fund grow for future use. However, this is not feasible in case of a mishappening and with your unfortunate demise, the long term goals of your child and family might remain unfulfilled. In such cases, the purchase of a Term insurance plan would be a huge benefit for your child and his future.

Hence, a term insurance plan is an arrangement for your children which will have real value for them in the future.  You can start making this arrangement very early in your life to avoid paying higher premiums. Once you are married and have children in the age bracket of 30, the best option is to choose a term insurance plan with an option of monthly income. When you are in the age bracket of 40, a term insurance plan with a higher cover can be beneficial for creating a corpus for your children’s future and other long term financial goals.