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Friday, April 16, 2021

How to tailor-make a term plan to suit your unique protection needs?

Life insurance policies like term plans offer a financial safety net to survive unfortunate events unscathed.

Updated: March 8, 2021 5:27:35 pm
To offset such a case and protect our loved ones, one of the most accessible and cost-effective financial tools is life insurance. (Representative image)

Written by Anil Kumar Singh

A black swan event, like the recent pandemic, has proven that life is full of uncertainties which has the power to impact one’s life in many ways including financial stability and future. To offset such a case and protect our loved ones, one of the most accessible and cost-effective financial tools is life insurance.

Life insurance policies like term plans offer a financial safety net to survive unfortunate events unscathed. But the time for one size fits all plan options is past, one should now personalize term plans based on their future life goals.

All of us go through similar life stages, but no two lives are the same. Each of us plan and protect life’s milestones differently. Our needs keep evolving so why shouldn’t our term coverage? It is heartening to see that in the last one year, earning individuals across age-groups have realized the importance of sound financial planning and protecting the dreams and goals of self and family. Here is how a hyper-personalized term plan can support one’s financial aspirations and requirements for each life stage:

Young Adults: As someone who has recently started earning a regular income, you may have limited liabilities. You are focussed on building your career and learning to be financially independent. However, it is matter of time that your responsibilities will increase owing to ageing and dependent parents and other milestones like marriage and kids. In this case, the most responsible decision would be to plan for your future in advance, by opting for a term plan. Planning in advance helps locking in a relatively low premium rate for the entire duration of the policy. Tweaking it to your needs, you can opt for higher coverage in line with your liabilities reap its full benefits, and then choose to reduce it when you have created substantial savings/investments in the future or approaching retirement.

Newly Married: One of the major concerns of newlyweds is to ensure income protection for their partner. Additionally, there may temporarily be an increase in liabilities and a considerable dip in savings during this stage, as the new couple might start planning to buy a new home, a new car, ceremonial jewellery and incurring similar expenses. A term plan with adequate joint cover for the spouse affords much needed financial stability at this point, especially if your spouse isn’t earning from external sources.

Parenthood: The joy of bringing a new-born into the world is unmatched. As a parent, one is now responsible for the growth and development of their child. It is imperative as young parents to invest in financial instruments that secure your child’s future, especially in your absence. Whether, you opt for a lump sum or an income benefit cover, it is bound to fulfil your child’s educational and other evolving expenses.

Also, at this age typically one’s parents become older and dependent; their future needs must be factored in when calculating the total number of dependent lives on the current household income. Considering all this, one needs to plan or re-evaluate existing financial plans to ensure the new dependents of the family are covered adequately.

Nearing Retirement: This can be the age for planning for a hassle-free retired life and saving some corpus for the loved ones. One can benefit from a whole-life term plan which offers life coverage until age 100 years and create a plentiful legacy for future generations.

The light bulb moment: Even if the responsibilities of marriage and children are intentionally not in the cards, everyone has certain risks and liabilities that need to be covered in this modern world. The uncertainties have taught us first-hand how important it is to have ready access to funds in such times. With a robust term plan, one can rest assured to enjoy terminal illness benefits, critical illness benefits, appropriate rider options, and tools to customize and secure their retirement income.

There has never been a better time where the financial protection of one’s family and assets were so easily accessible. The policyholder just needs to tailor-make a comprehensive solution using personalization features to carve a perfect protection fit for self and family.


The author is Chief Actuarial Officer at Aditya Birla Sun Life Insurance. Views expressed are that of the author.

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