Why Term Life Insurance is a Must-Have: Key Benefits, Risks, and When to Buy

If you’re the primary breadwinner or someone with dependents, securing your family’s financial future should be a top priority.

One of the easiest and most effective ways to ensure your loved ones are protected is by getting Term Life Insurance. In this blog, we’ll dive into the ins and outs of term life insurance, why it’s so crucial, and when the best time to buy is. Whether you’re thinking about purchasing life insurance for the first time or reconsidering your existing coverage, now is the perfect moment to get informed.

What Is Term Life Insurance?

Term life insurance is a pure risk cover that offers protection for a set period, known as the policy term. If the policyholder passes away during this term, the insurer pays a sum assured to the nominee. This payout can help your family cover debts, living expenses, or other financial commitments. However, if the policyholder survives the term, there is no payout.

This simple, no-frills insurance option is one of the most affordable and efficient ways to protect your family’s financial future.

Risks of Waiting: Don’t Delay Coverage

As age increases, so do the risks of contracting diseases, which might make you uninsurable later on. If you develop a health issue before buying insurance, you might face higher premiums or even denial of coverage. It’s smart to buy life insurance as soon as possible to lock in lower premiums and avoid the risk of being uninsurable due to health problems.

How Much Term Life Insurance Do You Need?

A common rule of thumb is to get 15-20 times your annual income as coverage. However, the actual amount depends on your family’s lifestyle, outstanding debts (like home loans), and future financial goals, such as your children’s education or marriage. It’s important to consider these factors to ensure your policy truly safeguards your family’s future.

When Should You Buy Term Life Insurance?

The earlier you buy, the better. Ideally, you should purchase term life insurance as soon as you have dependents—whether that’s your spouse, children, or even elderly parents. If you’ve taken on a large loan or haven’t saved a comfortable emergency corpus yet, life insurance becomes even more crucial. Buying early also lets you lock in lower premiums while you’re still young and healthy.

Let’s consider an example: Raj buys a term plan of 2 Cr until the age of 60. If Raj passes away before turning 60, his family will receive the sum assured. But if he survives beyond 60, the premiums paid become the insurer’s profit. Although this might sound like a downside, the point of term life insurance is to protect your loved ones in the event of an untimely death. The affordable premiums are what make it a worthy investment even if you outlive the policy term.

What Should You Look for in a Good Term Insurance Policy?

A well-chosen term life insurance policy should take into account:

Present and future expenses
Any outstanding liabilities, such as loans
Your long-term financial goals
Assets that your family may inherit

After evaluating these aspects, you can arrive at a more precise sum assured.

What If You Already Have Life Insurance?

If you already have life insurance, it’s still worth revisiting your coverage amount. As your family’s needs grow, you might find that your current policy is inadequate.

Many people mistakenly believe that they only need life insurance coverage until their 60s. However, as risks of dying increase after 60-65, insurers charge higher premiums for additional cover at that age. Therefore, it’s more economical and prudent to assess your coverage earlier and make necessary adjustments while you’re still young.

How to Calculate Expenses and Liabilities

When deciding on the sum assured, it’s helpful to categorize your financial needs:

Recurring liabilities like home loan payments or daily household expenses (around ₹1 Cr)
Future financial goals like your children’s education or marriage (₹50 lakh)
Assets and investments to be left behind (₹50 lakh)

These calculations give you a clear picture of how much term insurance you actually need.

Why Term Life Insurance Is the Best Choice

Term insurance offers several advantages:

Affordable premiums: Coverage is cost-effective, especially when bought young.
Tax benefits: Premiums paid are eligible for deductions under Section 80C.
Peace of mind: Knowing your family is financially secure if anything happens to you.

For example, a 1 Cr term plan for someone up to 60 years old can cost as little as ₹12,000 annually. However, for a 35-year-old, it costs ₹17,000, and for a 40-year-old, ₹20,000. This illustrates how premiums increase with age.

Conclusion: It’s Time to Secure Your Family’s Future

If you’re the sole earning member of your family or have dependents, term life insurance is a non-negotiable. It provides a safety net for your loved ones at an affordable rate. Whether you’re buying your first policy or reassessing your current coverage, now is the time to act. The longer you wait, the higher the costs and risks become. Take the necessary steps today to safeguard your family’s financial future.

By ensuring you have adequate coverage now, you’ll gain peace of mind knowing your loved ones will be protected no matter what.

Disclaimer:

The objective of this blog is to provide a simple and clear understanding of term insurance. We focus solely on explaining the basics of term insurance and its core benefits, without diving into more complex variations like Return of Premium (ROP) or step-up coverage. These advanced options can add layers of complexity, which are not covered in this guide.

Additionally, it’s important to note that in most cases, non-smoker rates tend to be lower compared to smoker rates across all age and gender groups. However, individual premiums can vary based on other factors, such as health conditions and lifestyle choices.

This blog is meant for educational purposes only and should not be considered financial advice. Please consult a licensed insurance advisor for personalized guidance.