Insurance policy has emerged as a popular choice of contingency plan for individuals who wish to secure the financial future of their loved ones. Typically, insurance policies offer a fixed lump sum amount to the insured or their beneficiary in case the insured event takes place – like an untimely death, accident, or critical illness diagnosis. Such a sum of money allows the beneficiary to tide over the financial challenges that are likely to arise due to the unfortunate event.
However, the ease with which an insurance policy can help account for financial liabilities and allow one to secure one’s financial future depends on the effectiveness of the plan. This makes it crucial for an intending policy buyer to choose the best term insurance plan carefully.
Tips to Start Looking for the Best Insurance Plan
Here are a few tips to start one’s hunt for the best term insurance plan –
Review your life insurance goals
Determine the extent of your financial goal like purchasing a house, retirement planning, or children’s higher studies, and the corpus you would need to achieve it. Based on the expense, individuals make pick a unit-linked insurance plan or a retirement-oriented insurance policy.
Determine the ideal coverage
First thing first, make sure your life insurance coverage is at least 10-15 times your current income. Subsequently, you should factor in things like – ongoing EMIs, funds required for a child’s higher studies or wedding, and inflation. Based on the lump sum expense, one should pick coverage that would be adequate for the beneficiary.
Find the best-suited insurance premium
Picking a leading insurance policy with a competitive premium is a smart choice as it ensures you receive quality coverage at an affordable amount. However, one must factor in their budget to ensure they can pay the same without delay. To better understand how much money they will be required to pay for a policy premium, individuals can use an insurance premium calculator. The tool will also help compare the premiums of other leading insurance providers with ease.
Select a suitable term
The rule of thumb to determine the ideal insurance tenure is to subtract the policyholder’s current age from the age they expect their source of income to end or the age by which they wish to accomplish a particular financial goal. Using this one can easily figure out the insurance policy term.
When Should a Person Buy an Insurance Policy?
There is no ideal time to get a life insurance policy as the same is closely dependent on the individual’s family and financial situation. However, a life insurance policy can become more expensive as you become older. This is because a 45-year-old who is in the pink of their health will be charged more than a 20-year-old as the insurance company deems the former to be more prone to illness and accidents. Moreover, the longer you wait to buy a life insurance plan, the cost of the policy will rise, and convincing an insurance underwriter to approve the coverage will become more difficult.
Hence, the best time to purchase life insurance is while you are young and avail of high insurance coverage at lower premiums and exclusions. Similarly, buying the policy will help build a substantial corpus from an early age and help develop a disciplined approach towards savings and investment.
When Should a Person Get a Term Insurance Policy?
Term life insurance protects the policy buyer financially for the period the contract is in place. While it is advised to acquire the policy at a young age, the beginning of the term may also be dependent on the age when you expect other family members to rely on your income. It is often recommended to ensure that the coverage lasts until the insured’s does not require financial aid. This is common for parents till their children reach adulthood. Similarly, couples who own a property together may choose to be financially protected until the entire mortgage is paid off.
The Right Age to Buy the Right Kind of Life Insurance Policy
Take a look below to understand which type of life insurance policy is best suited for which age –
In your 20s
People in their early twenties are often concerned with where to study, which new car to buy, and, at best, how to prevent running out of money. The thought of getting life insurance seldom occurs in their minds. Furthermore, the fact most people in their 20s don’t have any dependants, they believe they are too young to purchase a life insurance policy. However, these assumptions are not advantageous for their financial safety and self-independence. The earlier one starts the better equipped they are financially in the long run. Individuals should consider getting life insurance with a survival benefit so that they can utilise the corpus to meet their goals. Above all, they should look for a policy that allows the policyholder to increase their coverage and mode of payment to align their changing financial standing and goals with the insurance.
Note that purchasing an insurance policy in your 20s comes with several benefits such as –
- Lower premium rates
- Chance to build a higher corpus over time
- The option to try riskier investment options
- Plan a retirement fund with a small amount of money
- Develop a healthy habit of saving
- Develop a disciplined approach toward investment
In your 30s
People in their 30s are considered to be the most active buyers of life insurance policies. This is mostly because the age group comprises newlyweds and young parents. This is also the age group who starts thinking seriously about the security of their family, the future of their kids, and overall financial safety. Similarly, women policy buyers can consider parking their money in extensive term insurance for women to generate corpus to ensure the safety of their and their family’s financial future.
Regardless, the choice of the best term insurance plan should depend on users’ goals and requirements. Subsequently, individuals must compare the leading insurance policies in the market to make an informed choice that aids their financial planning.