How to choose the right term plan in your 30's

We always want the best for our family, don’t we? While you can give them the world when you are around, have you ensured their comfort even when you maybe aren’t?

When you reach your 30s, life changes. Your priorities and concerns shift from your own to that of your family. And when you have lives that depend on you, it is important to ensure their well-being and financial security.  So that when uncertainties knock at your door, you are prepared.  As their backbone, the responsibility to protect them is yours.

The first step towards fulfilling that responsibility is investing in Term Insurance. A term plan or an insurance plan is the simplest way to secure your future and that of your loved ones. In case of death or any unfortunate event, your family will receive an assured sum of money. For this, you will have to pay a certain amount as a premium on a monthly or yearly basis. That's all. A nominal amount every month can tide you comfortably over any unforeseeable tragedy you might face.

Before you decide on a term plan, you should consider a host of factors. Your term plan should be reflective of your lifestyle, your age, liabilities, and health. While choosing a plan that is ideal for you, here are a few things you should consider-

Determine your need

Your family is special, and so is every individual in your kin. Your school-going kid will have wants that are different from your toddler who has just started walking. Your cover amount should not be based on your income, but basis your family’s expenditure and bills.

The entire idea behind insuring your loved ones is to make sure that they do not have to give up on any needs or wants, even if you are not around. The cover amount, therefore, should factor in your family’s current lifestyle and your existing liabilities, like loan EMI’s, if any. 
Many financial experts suggest that a term plan with a life cover of approximately 20 times your annual income is ideal.

Consider Inflation

You may have amassed a very sound corpus for your future, but what if it is not enough? Say, you brought a cover of Rs 60 lakhs. About 20 years down the line, it will have reduced in its value in terms of your purchasing power.

Why? Inflation. 

Assuming an inflation rate of 5%, the value of Rs 60 lakhs will be reduced to about Rs 22 lakhs in this time span. Inflation erodes the value of money over time and causes the prices of products to rise. Hence, 20 years from now, not only is it a definitive reality that your costs are going to rise, but also that if you don’t know this, you probably won't have enough saved to cover them.
There’s no need to panic of course, just that while purchasing a term plan, always factor in inflation. Choose a term plan that keeps pace with inflation by offering periodic hikes. This will help you stay worry-free about any inflationary trends eating into your future foundations. 

Determine a time period for your plan

Sit back. Enjoy life. Don’t work after 50 if you don’t want to. Or work super hard and clock in till 70. Your choice!

In your 30s, you have an idea of where you are headed in life. This clarity should reflect in your term plan duration, too. The duration for which you choose to invest in the plan is extremely important. Many experts suggest that the ideal policy tenure is the difference between your assumed retirement age and your current age. So, if you are 35 today and wish to retire at the age of 65, your policy tenure should be 30 years.
Also, the earlier you buy your plan, the lower premiums you pay. As you grow older, the premiums payable rise, too. So, try and get a policy as soon as possible! Get a quote and see how much is the premium calculation working out for you.

Do a Cost-Benefit Analysis

Your term plan might look extremely costly to you today with its hefty monthly premiums. So make sure it’s worth it. Ask yourselves the following questions - does it cover for inflation? Would it provide decent cover in case of a tragedy? Does it provide additional covers for accidents and illnesses?

Also, consider the claim settlement ratio of the organization you choose to buy your term policy from. The claim settlement ratio of a company indicates the number of policies that have been successfully settled in case of deaths. Ideally, a company settling 98-99 claims out of every 100 claims each year is the best one. Choose carefully before you buy your plan.

Account for diseases and Illnesses
 

While buying a term plan, account for all possible scenarios, such as critical illnesses, disability, or employment loss, among others. Your foresight while purchasing a term plan may actually save you from living such a reality. By paying a small, additional amount, you can add riders or benefits to your plan that can protect from such tragedies. They add value to your plan by covering major life mishaps apart from death. 

Don’t worry if this sounds too complicated - speak to your insurance provider and allow them to walk you through this important decision. Your wisdom today can help your family in your absence tomorrow. Let the unpredictabilities of life not bog you down! Purchase a plan today and take a step to secure your loved ones’ future.

Feb 52/19

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