Affordable and sensible why you should opt for term insurance plans on a Rs 20,000 salary

Financial independence when you are fresh out of college and into a job can be a heady feeling. You officially now have a ticket to fulfil all your cherished dreams. But while it’s great to plan for holidays, gadgets and parties, it is wiser to start investing a little for unforeseen events too. Life is unpredictable and even a small start towards insuring yourself against the uncertainties of life is a good idea. A term insurance plan can be a good bet at this stage.

Why is it important to invest salary share in term insurance?

At the start of your career, salaries can be low making savings and investment seem a tough task. But term insurance plans with their low and affordable premium can make things easier. But before that, you need to be aware of why a term insurance plan is required.

A term insurance policy is an investment plan that acts as a life cover for you and provides your family with the death benefit that acts as financial support. Following are the areas, where it can help:

1. Taking care of your family’s monthly financial needs even if you are not around.

2. Repayment of the education loan you had taken, reducing the burden for your family.

3. Creating a lumpsum-saving corpus for your grieving family to take care of their future.

Not just death, some of the term insurance plans can be a super support if you are diagnosed with a critical illness. In case you are diagnosed with cancer or heart disease, these investment plans offer you a lumpsum payout that would help with the treatment.

How much should you invest if you earn 20k per month?

There is no age or income bracket for investing in Term Insurance Plans. Moreover, monthly premiums can start from as low as less than Rs 500, making them a highly affordable option.

Ideally, a life cover should be 10-12 times a person’s annual income to provide sufficient financial security to the family in case the unforeseen happens. Going by the 12 times calculation, with a monthly salary of Rs 20,000, the life cover chosen should be around Rs 2,880,000. Based on this figure, one needs to check premium amounts quoted by various available term insurance plans and pick the one that fits the budget best.

Features and Benefits of a Term Insurance Plan

In a market full of investment options, term insurance plans stand out with the following features and benefits:

Low premium: Most of these policies only cover premature death and offer no survival benefit. Thus, the premium required is quite low compared to other alternatives.

Long coverage: Term insurance policies can provide coverage for a period as long as 30-35 years, depending on the plan chosen. The idea is to cover the policyholder till old age.

Extensive coverage: Compared to low premiums, the sum assured in term insurance plans is pretty high as they target to provide financial security to family members in terms of the death benefit.

Added advantage: There are certain term insurance plans which offer optional riders to include coverage of accidental death or disability, sudden critical illness or diagnosis of terminal diseases through lumpsum payouts.

Payable Benefits: Term insurance plans only pay death benefits in case of the policyholder’s death within the policy period. No payment is made if he survives the policy term. But there are TROP policies available where premiums paid are returned after the maturity of the policy.

Tax Benefits: Both the premium and life cover in term insurance are exempted from tax under sections 80C and 10 (10D).*

FAQ:

Q: How much salary is needed for term insurance?

A: There is no income bracket or limit specified for investment in term insurance.

Q: Should term insurance be 10 times annual income?

A: Yes, the life cover in term insurance should be at least 10 times your annual income to be sufficient for future needs and battling inflation.

Q: What is the best age to buy term insurance?

A: Anyone in the age bracket of 18-65 years can buy term insurance. However, 20 years is the perfect time to start your investment plan and secure your family’s future.   

Related Articles

• Benefits of Term Insurance Plans You Must Know
• Salient features of a Term Insurance Plan
• A Comprehensive Guide for Term Insurance Riders