Why a term insurance plan is a foundation of sound financial planning

When we look at an old couple living a comfortable life with well settled children, we often end up commenting that the couple has lived a good life. Most probably, what we mean to say is that they planned their life and finances well. In fact, a sound financial plan is essential to achieve life goals and stress free life.

Unfortunately, most of us associate a strong financial plan with only good earning, a well planning household budget and decent savings. Do you feel we are missing something?

Sometimes what is not visible is the most important piece. The height of a building is dependent on how solid is the foundation and still the foundation is never visible to anyone.

Fortunately, for building a sound financial plan, creation of a solid foundation is neither that time consuming, nor that difficult to execute. Risk to any plan should be thought through and covered first. The same is true for the financial planning.

The biggest risk to any financial plan is the risk of disruption due to unforeseen situations such as death, disability or critical disease to the main breadwinner of the family. A simple term plan, with some riders, provides cover against the risk of life and health. And the best part is that, today, it is easy to buy a term plan.

Large cover at a low cost – How much does a family spends on entertainment? An HD cable connection at just Rs 540 per month, a Netflix connection at Rs 640 per month and a visit to a cinema hall for the family of four at an upwards of Rs 1,000 in any large city. But to ensure that the smiles this entertainment brings on the faces of loved one remain unaltered, just Rs 536 per month, for a cover of Rs 1 crore, for a 30-year-old male is what one needs to pay.

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With just a few clicks of a button – Time is the rarest commodity in our lives today. In fact, large number of innovations of the 21st century are focused on the time consumed for every job. We save a lot of time in terms of travel and standing in queues thanks to banking, payment of facility bills, etc, through internet and mobile. You can now buy term plan with just a few clicks of a button or even on the go, with a few touches on your mobile screen.

Stupendous effort-reward equation – In today's world we all value those things where we get disproportionate returns, as compared to the effort made to procure those. Gone are the days when you had to fill multiple fields on a paper form to get a life insurance. Just enter some of your details like Aadhaar, PAN, income details, etc, and you are ready to close the transaction of buying a term plan. Yes, in some cases you may still have to go for a medical examination, but that too can be scheduled at your convenience and conducted in the comfort of your home.

Ease of storage – Any long-term contract carries with it the risk of losing important document related to it. For a term plan, it could be difficult for the family to manage the claims process after the death of the breadwinner. An e-policy takes care of this problem, as it will reflect along with other financial records in your depository statement. Hence, there will be no difficulty of storage.

By Manik Nangia. The writer is director, marketing and chief digital officer, Max Life Insurance