Term Insurance for Salaried Parents: Securing Your Child's Future

Having a child is the most precious and joyful moment of anybody’s life. You want them to grow, bloom, and spread their wings towards their aspirations. Whether it’s moving abroad for their dream university program or giving them a big fat wedding, you obviously want the finest for them.

As a salaried parent, a chunk of your income goes towards securing a bright future for your child. Right from school fees to saving for college tuition and their wedding, you want each milestone to be perfectly achieved.

But have you ever thought about what will happen in your absence? How will these goals be achieved without a steady source of income?

Well, your answer is term insurance. One of the most affordable and straightforward types of life insurance, a term insurance plan offers your loved ones a fixed amount of money in the case of your untimely demise during the policy term. This money will help them meet their financial goals, whether big or small, and continue with the comfortable lifestyle you’ve created for them. Most importantly, your child will be able to reach all their milestones and dreams.

Let’s discuss the importance of term insurance for parents and how you can pick the right plan in this article.

Here are a few reasons why you should consider investing in term insurance to secure your precious li’l one’s future -

Financial Protection

Term insurance is like a suit of armour, ready to defend your loved ones against the unpredictable arrows of life. If you, unfortunately, pass away during the policy term, your loved ones will get the claim amount. This can be used for education, living expenses, paying off loans, etc. The money becomes especially important for your child, since it determines their financial goals.

To Meet Educational Milestones

You, as a salaried parent, want your child to get a top-notch education. Term insurance plays a very vital role here since the claim payout will help your kid get the funds for their academic aspirations without any compromise.

For A Comfortable Lifestyle

Your loss will not only be emotionally painful for your loved ones, but also financially devastating, especially if you’re the main breadwinner. A term insurance plan will keep your family’s finances stable and help them lead the lifestyle they’re used to - in your absence.

To Pay Off Any Pending Loans

You, as a salaried individual, may have taken loans such as a home loan, car loan, personal loan, etc. If these loans remain unpaid if and when you pass away, the burden of settling them will shift to your family, which can be quite worrisome. The term insurance payout will help them cover these unpaid loans, letting them live a worry-free life.

It’s Cost-Effective & Customisable

Term insurance is one of the most affordable life insurance variants, which makes a great deal, since it typically offers high coverage from lower premiums. It’s also highly flexible, letting you tailor the term plan to your and your family’s specific needs and budget. You can pick the cover amount, premium payment frequency, premium payment duration, and more.

Now, let’s discuss how you can go about picking the perfect term plan that fits your and your family’s financial situation!

Here’s a simple guide to choosing the most suitable term life insurance plan for your loved ones -

1. Figure Out the Right Coverage

Once you decide on investing in term insurance, it’s crucial that you pick the right cover amount since this is the financial protection you’ll leave behind for your loved ones and it would be worrisome if the amount were inadequate.

The most effective way to calculate the right coverage is by understanding the gap between what you have versus what your loved ones will require. For this,

➔ Calculate the amount your family will need. This includes -

• Living expenses like utilities, groceries, etc.
• Big expenses like children’s studies, weddings, and more.
• Big liabilities like loans or debts.

➔ Calculate the amount you have. This includes your present-day funds like savings, fixed deposits, assets, etc., multiplied by the relevant risk factors. Now, subtract the amount you have from the amount your family will need. You will also have to subtract any life insurance coverage you already know. The financial gap you’ll arrive at is the cover amount you need to opt for.

2. Factor Inflation
Growing old comes with increasing financial responsibilities. Marriage, kids, buying property, all of these milestones come with their own share of obligations. For this, you’ll need to keep upgrading your term cover so your loved ones are sufficiently protected.

And to make sure the cover amount is enough for them in the future, you'll also need to factor in inflation, by multiplying it by 2.5-3X.

One of the ways to tackle both issues is by going for the increasing cover feature, by which your term cover increases periodically till it reaches a maximum limit.

3. Pick the Proper Policy Term
For this, understand your present-day income, savings, and future obligations. Then, estimate when you will have completed these obligations and accrued enough wealth for the rest of your life, i.e. the age by which you plan on retiring. This is the age till which you’ll require term insurance coverage, maybe with an extra 5 years.

4. Choose the Right Premium Payment Term
Typically, term insurance requires you to pay premiums on a regular basis till the end of your policy term. However, you may want to get rid of this liability early.

For this, you can pick from either of these options -

• Limited Pay Option: You can pay off the premiums in a shorter duration with bigger instalments. You get several choices like 5-pay. 10-pay. 15-pay, and more.
• Single Pay Option: You can choose to pay the entire premium as a lump sum in one go during policy purchase.

5. Pick the Right Premium Payment Frequency
You can also choose how often you want to pay the premiums, based on your preference and convenience. You can pay it monthly, quarterly, half-yearly, or yearly. No matter what frequency you choose, ensure you set up auto-debit or standing instructions on your bank so your premiums are paid on time.

6. Go For the Married Women’s Property Act if You’re Married and Male
Consider a scenario. Let’s say you have taken a personal loan and pass away before repaying it fully. In this case, the claim amount will go to your creditors first, and your loved ones will get the balance amount. Other family members may also swoop in for the claim amount because of succession laws. Both these aspects can become inconvenient for your loved ones.

But, there’s a solution, if you’re a married male. You can buy term insurance under the Married Women’s Property Act (MWP Act) by signing an additional addendum. The Act provides specific rights to married women and ensures that the claim amount is given to your spouse and children first. They can then decide how to manage the finances.

7. Customise the Claim Payout
You can also select how you want the claim amount to reach your family; term insurance plans come with various claim payout options. Based on how well your family deals with finances, you can go for -

• A lump sum payout: Your family will get the complete claim amount as a lump sum in one go. This is a good option if you have unpaid loans or debts.
• Monthly income: Here, your family will get the claim amount in monthly instalments for a specific time span. If you want the claim amount to be used for daily living expenses, this is the option you should pick.
• A combination of both: Your loved ones will get a portion of the claim amount as a lump sum and the rest as monthly instalments for a determined time span.

8. Add Riders to Your Plan
Riders are add-on covers that expand the coverage of your term insurance plan by offering financial protection on the happening of certain contingencies like accidental disabilities, critical illnesses, and more. You can buy them at an extra cost. Some riders that you go for include Waiver of Premium Rider [UIN: 109A039V01], Critical Illness Rider [UIN: 109B019V03], Accidental Death And Disability Rider [UIN: 109B018V03], Surgical Care Rider [UIN: 109B015V03], and more.

9. Research & Compare Before you finalise a term plan, conduct adequate research and comparison to make a well-informed decision. Look at the options, features, limitations, etc. of different term products as well as the insurer’s customer service, track record, etc.

ABSLI Salaried Term Plan [UIN: 109N141V01]
This comprehensive plan is specifically designed for salaried individuals. It offers you the flexibility to tailor the plan that meets your needs. It ensures that you create a strong financial shield for your loved ones, whether it’s for educational expenses, maintaining their lifestyle, or keeping up with their everyday needs.

Key Features –

• 4 plan options for your unique needs and preferences.
• Life insurance coverage up to the age of 70.
• Various death benefit payout options, like lump-sum or monthly income.
• Extra protection with the built-in terminal illness benefit.

As a salaried parent, your responsibility towards your kids is more than providing them support for daily expenses. You need to create a solid foundation for their dreams and aspirations. By buying term insurance, you can create a strong financial cushion for your loved ones, so your children can reach the stars whether or not you’re around.