Starting a family is one of the most beautiful turning points for most people. It is not just a new start to life, but also a matter of huge responsibility. It requires you to be mentally, socially, and financially prepared. Whether it is about spouse or kids, being financially strong can give you a sense of confidence and a hope for a better life. This is when term insurance also becomes important.
When planning finances, it is crucial to also consider the unforeseen. For new parents, it is especially important to be financially sound and secure to ensure kids do not have to suffer financially even in their absence. Having term insurance can give you this peace of mind. Read on to know why young parents must not overlook the importance of term insurance.
Term Insurance Explained
Term insurance is one of the types of life insurance that offers pure life cover. A basic term insurance policy provides a lump-sum death benefit to the nominee in case the life assured dies during the policy tenure.
It is known as the purest form of life insurance since there is no other element involved, like savings or investments. However, if you choose a term return of plan, TROP, the policy also offers survival benefits. If the life assured outlives the policy tenure, the premium paid is returned as a survival benefit. Such policies may have a comparatively higher premium.
What Should be the Sum Assured?
When purchasing term insurance, choosing the right sum assured is crucial. You may have in mind a ₹1 crore term insurance. Well, ₹1 crore is a hefty amount, but that’s not all you need to focus on. Depending on the ongoing expenses of your family, future financial needs and goals, and inflation, you need to choose a practical amount. So, calculate your family’s financial needs smartly to choose the right sum assured.
Importance of Term Insurance for Young Parents
There are multiple ways in which term insurance can be beneficial for young parents. Some of the most striking benefits are discussed below:
- Lower Premium for Young Adults
Young people are more likely to be healthy and free from chronic diseases. This is the reason why it is easier for younger people to get life insurance at lower premiums. As young parents, especially those under 30, you can secure a term insurance policy at an affordable premium.
If you are planning finances in life to lead a comfortable family life, purchasing life insurance early can simply mean a lower premium burden.
- A Strong Financial Security
The purpose of term insurance is to secure the financial interest of your family. It is a way of ensuring financial security for the family even during the absence of the life assured. This is especially essential for families with single-earning members.
When you are planning the next milestone of your life, it is essential to have strong financial security against unforeseen conditions.
- Protecting a Child’s Future
During the growing years, a child needs both emotional and financial support. From school to college and until the child achieves financial independence, it is essential to provide sufficient financial protection. This is also why a term insurance policy is important.
In case of an unfortunate incident, the dreams and future of a child must not be compromised due to financial constraints. And so, this is when term insurance becomes an important tool.
- Tax Benefits
When it comes to financial planning, for people of any age, sorting out tax liability is also a part. With term insurance, you not only protect your financial future but also benefit from it today. Yes, the premium paid for term insurance is eligible for tax deductions as well.
Section 80C of the Income Tax Act of 1961 lets you claim up to ₹1,50,000 lakhs as tax benefits. Additionally, the death benefit under term insurance is tax-free u/s 10(10D) of the Income Tax Act.
- The Peace Of Mind
Last but not least, term insurance is peace of mind. Sorting finances in life is very important and has to be calculated properly. Having a term insurance policy gives you the peace of mind that your family will not have to struggle with financial needs even if you are no longer there to provide for them.
Conclusion
For young parents, term insurance is more than just a financial tool. It is a promise of stability and security for their family, especially kids. The earlier you start, the better opportunities you have. Not only this, but the early purchase of term insurance also means lower premiums and longer tenure. Tax benefits remain another added perk of purchasing term insurance.
If you are planning financial stability for your family, do not skip on term insurance. It is not something you need to worry about in the later phase of life, but as early as you can. For young parents, liabilities are also limited, which makes it easier to purchase term insurance without any hassle. Start your ideal financial planning today!
