Start Your New Life on the Right Foot with Term Insurance
Weddings bring families together and celebrate new beginnings. When two individuals decide to tie the knot, they make the decision to plan their futures together. An important aspect of future planning involves finances. Sadly, most newlyweds put off planning their finances until much later. The delay could impact their future plans as well as their retirement. Let’s look at why newlyweds should think about getting term insurance together.
What is a Term Insurance Policy?
A term plan is a type of life insurance policy. It offers life coverage for a limited time, although newer policies also provide whole-life cover. These plans offer high sum assured amounts at affordable premiums since they do not have additional maturity benefits. At most, policyholders receive a return of the premium amounts paid and some interest if they survive during the policy tenure. As with other life insurance policies, term plans provide financial stability when the policyholder’s family needs it the most. Let’s look at how term insurance policies impact newlyweds.
Why Should Newlyweds Buy Term Insurance Plans?
Affordable Life Cover
Many people today choose to get married in their 20s or 30s, once they start working and have some financial independence. They may not have earned enough to opt for an endowment plan or invest in other avenues. A term insurance policy provides affordable life cover for young couples. It’s a good idea to opt for two term life policies, one for each partner, or a joint term insurance plan.
Maintain the Standard of Living
Most young couples bring their own assets to their married life. Both partners contribute financially to the running of the household. The loss of any one income could significantly impact the other person’s ability to maintain their standard of living. The payout from a term insurance policy will allow the surviving spouse to maintain financial stability and their standard of living.
Repay Outstanding Debt
Marriage comes with several new responsibilities. Many couples opt for loans to help purchase a vehicle or a home. The payout from a term plan will enable the spouse to repay debt without having to worry about their finances too much. While picking a term insurance policy, newlyweds should ensure that the sum assured is enough to take care of any outstanding debt.
Inheritance for Heirs
Once they tie the knot, many couples think about growing their families. After becoming parents, couples do whatever they can to provide for their children. A term plan allows them to secure their child’s future, no matter what happens to them. The payout from a term policy will provide any/their heirs with financial stability when they need it the most.
Premiums paid on term insurance may be eligible for tax benefits as per the applicable sections of the Income Tax Act, 19611, as amended from time to time. Death payouts received in case of an unfortunate demise shall be considered as tax-free in the hands of the surviving spouse (nominee). Newlyweds can thus use their term insurance plans to help them maximise their savings and minimise their taxes.
When Is the Right Time to Buy Term Insurance?
When it comes to planning for the future, the earlier you start the better. Newlyweds should prioritise sorting out their finances and buying a term insurance policy within the first year of their wedding. Younger people are generally healthy, so they can get higher sum assured amounts at lower premiums. The longer couples wait, the more they might have to pay for the same coverage.
Things to Consider Before Buying Term Insurance
Before buying a term insurance policy, couples need to think about:
The Sum Assured
Individuals often struggle to understand how much life cover they require. There are a few ways to calculate the ballpark figures. First, couples must think about how much each individual earns per year. They should then multiply the amount by 15 or 20. The answer is the minimum sum assured they should choose for themselves. Additionally, they should include the cost of any pending debts, such as a home loan. The idea is to pick a sum assured that allows the spouse to maintain their standard of living and pay off debts without having to worry about their future finances.
Some term insurance plans allow individuals to customise and enhance their policy with the purchase of riders or add-ons. Let’s assume one partner has a job that requires them to travel frequently. They run a higher risk of meeting with an accident than their spouse who works from home. Opting/opts for an accidental death rider for the first partner could prove beneficial in the long run. The add-ons provide an additional payout in case the policyholder meets with a fatal accident.
The Claim-Settlement Ratio
Crucially, couples should check the insurance company’s claim-settlement ratio before they decide to buy a term insurance policy. The claim-settlement ratio indicates how many claims the company settles of all claim requests received. The higher the claim-settlement ratio, the more likely the nominee is to receive the payout after filing a valid claim. HDFC Life has a term insurance claim-settlement ratio of 98.66 %2, one of the highest in the market.
Choosing to marry somebody is a big commitment. You can show your loved one’s how much you care about them by working out your finances and purchasing a term insurance policy.
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