The pleasure of becoming a parent comes with several responsibilities. As soon as your child is born, the expenses commence. As your child grows, the expenses continue rising. As parents, it is important to start planning saving methods to ensure that you take care of your child’s long-term requirements.
Unfortunately, life is uncertain and your child may have to grow up in your absence due to an unforeseen event. You would not want your family to face financial distress while dealing with an emotional loss. An excellent way to ensure your loved ones’ financial stability is to avail of a term life insurance plan.
Life coverage and financial objectives
Over the years, there are several goals that you need to meet for your child and each of these requires finances. The first step to financial planning is to identify the different life goals at various stages. Before you begin saving to meet these different goals, it is recommended that you procure a life cover with a term insurance policy.
A term plan is a pure life cover and pays the benefits in case something unfortunate happens to you during the policy term. Term plans are income-replacement policies that allow your loved ones to maintain their lifestyle in your absence. Moreover, it ensures that your child can pursue his dreams without facing a liquidity crisis.
Risks to self-fund goals
Unlike regular life insurance plans, term policies do not have survival benefits and therefore, many people do not buy these. However, one of the benefits of term insurance plans is that it allows you to avail of a higher life cover at an affordable premium.
Many parents to save the term insurance premium by investing in avenues such as Public Provident Fund (PPF), real estate, gold, and mutual funds to accumulate wealth. However, these are self-funded, which means you need to continue investing regularly to reap its benefits in the long-term. In case of an untoward event, your family members may not be able to continue investing in these, which jeopardizes your child’s future. This should help you understand the importance of term insurance to ensure that your child financially stable and he fulfills his dreams in your absence.
How do term plans help?
Term policies are guaranteed protection plans. They provide a certain sum assured for a pre-determined period for a fixed amount paid as premium. In case of an unforeseen circumstance during the policy term, your nominees receive the payout. However, since there is no savings component in these plans, there are no maturity benefits in case of your survival. The reason why term insurance premium is low is that only a small component is used for administrative expenses and the majority is towards providing life cover.
Determining the sum assured
Having understood the importance of term plans, you need to determine the sum assured. It is recommended that you avail of at least ten times your annual income as the sum assured and include additional coverage for meeting long-term goals.
You must not have any doubts about why term insurance is important so buy a policy today and secure your child’s financial wellbeing.