Family Term Insurance: Protecting Every Member Without Emptying Your Pocket

The unpredictability of life has a way of causing much upheaval. Life insurance is one of the surest ways to protect the financial interests of your loved ones in your absence. Term insurance is a form of life insurance plan that allows you to avail of the benefits of a policy at very reasonable and highly affordable rates. Family term insurance further helps simplify the process and extend the values to all the beneficiaries at even more reasonable costs.

Family term insurance is a form of traditional term insurance that allows you to insure the lives of different family members under a single plan. The policyholder can opt to secure the financial interests of the entire family and ensure financial security for everyone they love in the event of their unfortunate and untimely demise.

Much like traditional term insurance, family term insurance allows you to choose a suitable sum assured and your policy tenure. The insurer calculates the premium based on these factors and the members insured and secured under the plan. In the event of your demise, the beneficiaries can file a claim on the family term insurance to reap the respective benefits of the plan.

There are several benefits to availing of the family term insurance plan. From savings to future planning, your family can have the financial relief they need:

Family term insurance, much like traditional term insurance, offers tax benefits. Under Section 80C and Section 10(10)D of the Income Tax Act in India, you are eligible for tax exemption if the annual premium meets the terms. If the annual premium is less than INR 1.5 lacs under the old tax regime and under INR 2.5 lacs under the new tax regime, then you are entitled to an exemption. The death benefit that your family receives in the event of your demise is also tax exempted.

It is hard enough to lose a member of the family, but to have financial stress accompany that pain can be too much to bear. That is where family term insurance comes to the rescue by providing your loved ones with the relief funds they need to navigate tough financial situations.

The death benefit that your family may receive from filing a claim against the family term insurance policy can help them plan major life goals. Children’s school and higher education, starting a business, and planning for a wedding ceremony are all viable life goals. Your family can utilise the funds to bring their dreams to fruition.

Your family can also use the death benefit or if you survive the term insurance tenure, then you can utilise the maturity benefits for financial planning. You can use it to settle outstanding liabilities or invest the money into building your net worth. The lump sum amount serves as both a savings plan and seed money for new financial adventures.

The benefits of family term insurance far extend the basic settlement of death benefits to provide relief. It is an opportunity for new beginnings as your family copes with the loss of someone they love and emerges in the wake to plan their future.

Determining the amount of coverage that will suffice to take care of your family requires careful planning. You will need to consider the following factors when making the decision:

• The amount must be enough to beat the inflation rate and match the value of the Indian rupee.
• It must match the income ratio in the household.
• It must be sufficient to meet the common expenses of the household as well as additional emergency expenses.
• It must factor in major life goals such as education, business, etc.
• It must also account for possible life-stage accomplishments such as buying a house, marriage, retirement, etc.
• It must be enough to repay debts and still secure a corpus for your family’s financial future.

For instance, let’s assume you purchase a 1.5 crore term insurance plan. This ensured that in the event of your demise during the policy tenure, your loved ones will receive an INR 1.5 crore settlement from the insurer. You need to evaluate whether a 1.5 crore term insurance plan meets the basic requirements of the family.

Based on the factors listed above, if the 1.5 crore term insurance plan seems viable and the premium is affordable, then you can opt for the sum assured in your policy. However, if it seems that a 1.5 crore term insurance plan would fall short of meeting the financial requirements of your entire family, you can opt for a higher sum assured, such as a 3 crore or 5 crore term insurance plan.

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