Protect your loved ones from financial distress

You are in the pink of health and full of energy. You also want to explore the world and make a difference. There is nothing you think as out of your reach. Thus, the thought of dying seems too macabre and unrealistic. But think about, what if something were to happen to you…

There is little you can do to prevent emotional devastation for your loved ones. But you definitely don’t want to add a huge financial burden to their emotional loss. You can remove the risk of additional financial burden off your family and provide for them to continue to live the same quality of life financially.

Financial burden is not just for your spouse or kids. Remember, if you have taken an education loan or borrowed for college tuition, it is likely that your parents would have signed as guarantors. And in your absence, they will be straddled with that loan amount in their retirement days.

Life insurance provides a financial buffer for the people you care about in the event something happens to you.

What is the right type of Life Insurance policy?

When buying Life Insurance at early stages of life, one should primarily consider Term Life Insurance. Term Life Insurance is a simple policy; it’s a protection against any untoward event. You pay premiums for the life of the policy. If the person insured passes away during the life of the policy, there is a guaranteed amount of money to be paid to the designated beneficiary or legal heirs. Term life insurance does not build up cash value; so, if the insured lives beyond the policy term, there is no payout.

Term Life Insurance is quite inexpensive, especially if you are young and don’t smoke. Just to give an example, a 30 year old male, non-smoker in good health would be able to get Term Life insurance of $ 400,000 for a 20 year Term at $ 300 per annum, that’s less than $1 a day. Here is another example, a 30 year male, non-smoker in good health can get cover of $ 1 million for 20 year Term policy at $ 685 per annum that’s less than $2 a day. Much cheaper than your daily morning coffee!

Whole life insurance on the other hand, provide provides protection as well as acts as an investment. Agents tout whole life policies for their “cash value,” money you can theoretically tap into later in life. However, these policies may not perform as pitched and carry with them a high market risk. Whole life insurance can get very expensive. With other pressing financial priorities, it is best to keep insurance and investments separate.

How much Life Insurance to buy?

Lot of people approach quantum of life insurance as multiple of income. However, a better way is to calculate the amount of money that a family will need over the remainder of their lifetime. For example, add up monthly expenses, any remaining mortgage, anticipated tuition for kids, any college fees and funeral expenses. Calculate these for the period of insurance or time till such needs are present. Ideally, you should account for inflation and investment returns. This will provide you a good indication of amount of term Life insurance to be bought.

Term Life insurance is quite flexible, you can buy multiple policies with different terms to match various life events. Also, if your lifestyle changes or financial burden/dependency increases while you are insured, you can increase your life insurance by buying more. As certain goal is fulfilled, and you no longer want or need life insurance, you can simply stop paying the premiums, and the policy will end without any additional fees.

When is the best time to buy Life insurance?

The best time to buy Life Insurance is NOW! You’ll never be younger than you are today. And the younger we are, the healthier we are. These two are most important factors for getting affordable life insurance coverage.