Firstly, should you consider purchasing insurance?
The rising cost of medical care and medicine bills has made it difficult for an average person to cope with hospitalization and aftercare. An automobile accident or a sudden catastrophe or death of the earning member can leave the entire family in a financial pitfall. Enter the insurance policy, which is an agreement that the insurance company makes with the individual known here as the insurer to help the family with the finance that could bail the family out of the financial loss.
Hence, ideally, one should purchase an insurance policy. It is important to protect your loved ones and make sure they never have a financial hardship; my advice is to consider a term life insurance policy that is at least 20 times the annual income that you need to be replaced.
Secondly, why consider a term plan?
- It protects your family and loved ones who are dependent on your income. If you are single with no one to care for, such as children, mother, father, spouse, and no one relies on your income, life insurance is not needed by you. But if you are single and planning to get married or are already married, having a spouse, children, parent, sibling who relies on your income, you can get them protected from being financially dependent on you with life insurance.
- Term life insurance is the single best option. If you have someone in your family with special needs, only then there is a need to buy whole life, or universal life, which are referred to as “permanent” policies and cost a lot more. Otherwise, for a regular husband, wife and a child or two or including grandparents, a term life plan is the single best option.
What are different premium paying options?
Since the life insurance cover should be 20 or ideally 25 times the annual income of the person, the premium may be higher.
The left insurance companies do allow to pay the premium in a one time go called the Single premium policy or monthly, quarterly and annually.
What are the benefits of a single premium policy?
There is no need to remember or set a reminder to pay the premium. If you have the lump sum to pay and instead of keeping it for a meagre sum of interest, get a single premium policy
The benefits of a single premium policy, therefore, are many:
- Peace of mind – There is no tension of a policy lapse in case there are not sufficient funds in the future to pay the premium.
- Convenient – No monthly or yearly deduction on the savings account; therefore, there is no need to set aside funds in the account for an auto deduction.
- Tax benefit – Premiums to life insurance policies get the benefit of section 80 C of the Income Tax Act.
- Plans such as ICICI Single Premium Policy gives the advantage of choosing the allocation of funds into Equity, Debt or Balanced funds.
- Switches can be made in the allocation of the funds. One can switch the allocation depending on their risk profile for that year or month.
- In ICICI Single Premium Policy, there is no additional cost to make switches in the allocation of the funds among different funds.